Cross-asset correlation remains high in 2020 but some assets are breaking away

The inability to truly diversify their cryptocurrency holdings remains a major issues for cryptocurrency investors. When the price of one cryptocurrency falls, generally the majority of other cryptocurrencies will fall as well. 

High cross-asset correlation is also a serious issue for crypto-collateralized stablecoins such as Dai. When prices drop rapidly, the collateral backing Dai gets reduced when too many CDPs are liquidated. Currently, multi-collateral Dai supports ETH, BTC, USDC, and BAT. If Dai could support uncorrelated assets, Dai’s collateral backing wouldn’t be reduced as much if only one asset fell in price. One solution is to support tokenized real assets but they are not censorship-resistant and need a certain level of trust.