The recent decrease in correlation between the prices of Bitcoin and Ether, the world’s two largest cryptocurrencies, has caught the attention of crypto enthusiasts. For the first time since November 2021, this correlation has dropped below 80%, signaling that both digital assets are no longer moving in tandem as they once did.
The rolling 30-day correlation between Bitcoin and Ether has fallen to around 78%, indicating that the asset prices may no longer respond in the same way to broader macroeconomic conditions and pivotal events. Interestingly, while this development occurred, Bitcoin’s price seemingly lost its relationship with the US stock market during a time of increased regulatory scrutiny. Meanwhile, Ether’s price surged significantly thanks to the Shanghai hard fork, walking a similar trajectory as seen during the September 2022 Merge, when Ethereum transitioned to the proof-of-stake consensus mechanism.
This development has critical implications for the crypto world as it might affect Ethereum-based tokens in particular. As these tokens generally have a strong connection to Ether’s price movements, a weaker link with Bitcoin could lead to reduced volatility in response to large-scale events that have the potential to shift markets. Nevertheless, this situation might also imply that ETH and other ERC-20 tokens can chart their own course, independent of Bitcoin’s price fluctuations.
In the past, Bitcoin’s price volatility played a crucial role in influencing the prices of ETH and other altcoins traded on the crypto market. However, going forward, it seems that ETH and ETH-based coins might react differently to Bitcoin’s price movements. With the drop in correlation happening for the first time since November 2021, further price divergence between these two leading assets is highly anticipated, given the current market conditions.
So far in 2023, the values of Bitcoin and Ether have increased by nearly 61.8% and 50.05%, respectively, based on available data. As it stands, Bitcoin’s price is hovering at around the $26,850 level, while Ethereum trades near the $1,800 mark.
As the crypto landscape continues to evolve, it is crucial for investors to conduct thorough market research before diving into this volatile realm. This development does not only come as a personal opinion but should alert readers to the reality that market conditions are subject to change—and neither the author nor the publication bears responsibility for any personal financial loss resulting from investment decisions.
Source: Coingape
