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The contagion effect from coronavirus epidemic impairs valuations for all asset classes. Q.ai tries ... [+] to build an optimal multi-asset portfolio in this environment.

The drop in global markets over the past few weeks is forcing Wall Street and leading fund managers to reconsider what truly is an appropriate diversified multi-asset allocation in the current market environment.In our attempt to answer this question, we look beyond basic correlations and consider other non-linear forms of price relationships to help us better understand how to build a multi-asset portfolio with Bitcoin.

We are looking at a portfolio made up of the following assets in order to figure out how they have been moving during current sell-off as the Coronavirus epidemic worsens:

What we discover is that it is easier to build a diversified portfolio simply by focusing the majority of the portfolio allocation on Bitcoin, SPY, USO and TLT.Since all these assets are inherently US Dollar exposed, adding UUP to the mix would simply increase exposure to the US Dollar.The strength of SPYs correlation with IWM and EFA suggests an increase in either ETF would simply increase our potential exposure to stocks (which appear to highly correlated globally!) while TLT has a natural obvious price relationship with HYG.

Conventional approaches to portfolio construction is built around the concept of Modern Portfolio Theory (MPT) which assumes that asset allocation should be built around the volatility of assets and their related correlations.Volatility simply measures how much the price change of an asset changes from its average expected change while correlation measures how different assets in a portfolio move together.As an example, if you own Facebook (FB), Apple (AAPL) and Citigroup (C) in a 3 stock portfolio with FB (FB) and Apple (AAPL) being highlight correlated, MPT would say you should own more of Citigroup (C) to mitigate the high correlation between Facebook (FB) and Apple (AAPL)assuming the volatilities of each stock were similar.The biggest issue with this approach is that it is backwards looking, meaning it does not consider future returns but rather assumes past performance will be indicative of future performance. On top of that, a simple MPT approach favors lower volatility assets; since it is backwards looking, the approach assumes a low volatility asset in the past will continue to be a low volatility asset in the future. That is a pretty big assumption! In addition, simple linear relationships do not properly explain how assets might cluster during shocks, like the Coronavirus epidemic we are experiencing at the moment, or just simple clustering in general.

A simple correlation analysis points to a rapid rise in positive correlations in between Bitcoin, IWM and HYG.Notably, the correlation between IWM and Bitcoin seems the strongest though the relative jump between Bitcoin and HYG is the strongest.A positive correlation simply means that Bitcoin is moving in the same relative direction as both IWM and HYG (when Bitcoin is up, IWM is up, and vice versa).While it is worth noting that correlations between Bitcoin and USO (and great proxy for oil and commodities in general) and EFA (international stocks proxy), there hasnt been a material uptick in the cross-sectional correlations of the other assets in our target multi-asset portfolio.In other words, while the sensitivity of other assets in our target multi-asset portfolio remain more or less the same, Bitcoin appears to have a heightened sensitivity.There is probably a US Dollar effect in play here though correlations between UUP and Bitcoin have not markedly increase.The US Dollar effect on Bitcoin is probably worthy of its own standalone article!

Correlation analysis of assets in Q.ai target multi-asset portfolio that includes Bitcoin. ... [+] Correlation analysis is based on price moves from February 20, 2020 through March 20, 2020

While correlation and volatility analysis is useful, we do not think alone it helps to build truly robustly diversified portfolios.The limitations of MPT is that its analysis is purely linear and backwards looking in general but, in reality, markets are anything but linear...and past performance is never a useful predictor of future returns.As a result, we like to use clustering techniques based on artificial intelligence (AI) methodologies to see if we can discover more interesting and non-linear relationships that a basic correlation-volatility matrix might miss.

For our analysis, we use a basic Affinity Propagation algorithm.The ease of use with Affinity propagation is that while it is a centroid algorithm, it is does not require us to estimate the number of clusters like other similar algorithms such as K-Means. What we are looking to see if how the different assets in our target multi-asset portfolio cluster.

Outside of tight clustering between SPY, EFA and IWM, we not observe examples of clustering in our target multi-asset portfoli over the past month. As expected, we see the strength in relationship between BTC and HYG increasing over the past month.Previously, the relationship between both BTC and HYG would be described as nominal at best.The relationships between SPY, IWM and EFA are relatively strong but what is more interesting is that there are no other significant relationships between the other assets in our target portfolio and Bitcoin this is a major deviation from what our correlation analysis implied.

Analysis of clustering of assets in Q.ai target multi-asset portfolio that includes Bitcoin. The ... [+] methodology that is used is Affinity Propagation. Price data is for the period February 20, 2020 through March 20, 2020.

As a result, based on our analysis of both correlations and how different assets in our target portfolio cluster, we think it makes the most sense to focus the majority of the portfolio allocations on Bitcoin, SPY, USO and TLT.Since IWM and EFA both have high correlations with SPY at this time, allocating between the 3 becomes a nominal exercise though SPY will offer better diversification vis--vis USO and Bitcoin.

Read the original post:
Bitcoin Highly Correlated With HYG And IWM ETFs As Contagion Effect From Coronavirus Epidemic Spreads Across All Asset Classes - Forbes

The worlds no. 1 digital coin, Bitcoin, has caught a fresh bid-wave and surrendered the 6k barrier yet again, as we head towards the weekly closing. Ethereum and Ripple also yielded into the broad crypto sell-off this Sunday, with the former emerging as the main laggard amongst the top 3 most dominantly traded digital assets. The total market capitalization of the top 20 cryptocurrencies now stands at $170.05 billion, as cited by CoinMarketCap.

The top three coins could likely resume Fridays decline, with the FXStreets Confluence Detector tool suggesting key technical levels to watch out, as we step into a fresh week ahead.

With the sellers back in action, Bitcoinis likely to face the immediate resistance at 6191, the midline of Bollinger Band on 4-hour chart. Further north, 6255, the confluence of Fib 61.8% 1D and SMA5 4h, is likely to challenge the recovery attempts.

The coin will accelerate its recovery momentum once the above resistance is cleared, as the buyers will target Fib 23.6% 1W aligned at 6383.

Having said that, to the downside, the immediate support is now seen at 5871, the confluence of SMA5 1D and Previous Low 1 Day.

A failure to resist the latter will expose the strong support at 5743, Pivot Point 1 Month S3.

Having reversed sharply, Ethereumhas breached the Fib 23.6% 1D support located at 129.0, with the downside now opening up towards Fridays low of 115.80 amid a lack of significant support levels to cap the declines.

The recovery attempts will continue to face stiff resistance near the 134 area, where the SMA5 1H, Fib 61.8% 1D, Fib 38.2% 1W and SMA5 4H intersect.

Therefore, sell the bounce could emerge as the ideal theme for trading ETH/USD in the coming days, as explained here.

Ripplerespected the rising channel breakdown and reached the pattern target at 0.1523, with the further downside still in play, in absence of strong support levels. The 0.1500 psychological level could be tested en-route the next barrier seen at 0.1469, Fib 61.8% 1W.

The coin will target the Pivot Point 1 Month S2 at 0.1452 should the bulls succumb to the bearish pressure.

Alternatively, the bulls will have to chew the offers at 0.1582 in order to re-attempt the 0.16 handle. Any substantial recovery will regain traction only on a daily closing above the latter.

See all thecryptocurrency technical levels.

Continued here:
Top 3 Price Prediction Bitcoin, Ethereum, Ripple: A sea of red returns as weekend love disappears - FXStreet

With an estimated billion people staying home, remote working or just watching shows online all day, telecom infrastructure is coming under great strain. Experts and companies are mostly saying that the risk is far from critical yet, but the EU has taken the possibility of the internet crashing very seriously. Netflix, Google, Apple, and Amazon have begun to restrict HD video streaming to reduce data usage in Europe.

Also Read: Encryption Standards Threatened Under Pretext of Battling Coronavirus

The epicenter of the coronavirus crisis has squarely migrated from China to Europe these days. Italy bore most of the brunt, with the highest number of casualties so far, but Spain, France and other countries are also suffering the strong effects of the pandemic growing quickly. Governments have reacted by imposing curfews on citizens, closing borders, shutting down businesses and generally putting in place various restrictions on normal life in order to slow the spread of the virus and flatten the curve.

The main measure that everyday people were asked to take in response is to stay home and avoid any unnecessary trips outside the house. As such, it is no surprise that internet usage in Europe has spiked, with employees working remotely, students learning online and everybody streaming videos. This caused European telecommunication companies, such as Vodafone and Deutsche Telekom, to raise the alarm and the European Union soon reacted.

The EU Commissioner for Internal Market, Thierry Breton, revealed on Twitter that he has had discussions with Netflix CEO Reed Hastings and asked that the streaming service downgrades its broadcasts in Europe from high definition video quality to lower resolution. An hour of HD video from Netflix takes about 3GB of data and an hour of standard definition (SD) video takes about 1GB of data so the move could cut a significant amount of used bandwidth.

According to recent estimates, video streaming services can account for more than 60% of global internet traffic, with Netflix alone responsible for 12% of online bandwidth around the world. The company was the first of the operators in the market to announce it will take measures to help with the situation in Europe.

Given the extraordinary challenges raised by the coronavirus Netflix has decided to begin reducing bit rates across all our streams in Europe for 30 days, a Netflix spokesperson said. We estimate that this will reduce Netflix traffic on European networks by around 25% while also ensuring a good quality service for our members.

Google has also reduced bitrates on its subsidiary Youtube, where an estimated one billion hours of content is being watched every day. This reportedly happened after EU Commissioner Breton talked with Alphabet CEO Sundar Pichai and Youtube CEO Susan Wojcicki. We are making a commitment to temporarily switch all traffic in the EU to standard definition by default, the company said.

Amazon has also taken similar measures on its Prime Video service. We support the need for careful management of telecom services to ensure they can handle the increased internet demand with so many people now at home full-time due to Covid-19, an Amazon spokesperson said. Prime Video is working with local authorities and internet service providers where needed to help mitigate any network congestion.

Disney has postponed the planned launch of its Disney Plus streaming service in France at the request of the local government while going forward with the plan in other European markets. It also said it will lower its overall bandwidth utilization by at least 25% in all of the markets launching Disney Plus on March 24, 2020. This will reportedly be done in response to an EU request to ensure the smooth functioning of the broadband infrastructure.

According to reports from European subscribers, Apple has reacted to the situation by downgrading the streaming quality of Apple TV Plus in Europe.

What do you think about the possibility that the internet will crash due to the global coronavirus crisis? Share your thoughts in the comments section below.

Images courtesy of Shutterstock.

Verify and track bitcoin cash transactions on our BCH Block Explorer, the best of its kind anywhere in the world. Also, keep up with your holdings, BCH and other coins, on our market charts at Bitcoin.com Markets, another original and free service from Bitcoin.com.

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With an estimated billion people staying home, remote working or just watching shows online all day, internet infrastructure is coming under great strain all around the world. Experts and companies are mostly saying that the risk is far from critical yet but the EU takes the possibility very seriously. Netflix, Youtube, Apple and Amazon Prime have begun to restrict HD video streaming to reduce data usage in Europe.

Go here to read the rest:
The Internet May Be Next Victim of Coronavirus Pandemic Netflix, Google, Apple and Amazon React - Bitcoin News