The correlation between bitcoin and ethereum prices fell below 80% for the first time since November 2021, signaling a major shift in their relationship.
The 30-day correlation between bitcoin and ether has dropped to around 78% this week, according to data provider Kaiko. Correlation is a measure of how close two asset prices are to each other. When the correlation is low, it means their prices move in different directions more often.
In other words, the falling correlation means that the prices of BTC and ETH are not moving as closely as they used to.
Bitcoin-Ether Correlation Declines
Last month, exchange Coinbase analyzed the correlation between BTC and ETH gains. They concluded that bitcoin has been falling since mid-to-late March, when it began to outperform other cryptocurrencies amid U.S. banking turmoil and heightened regulatory scrutiny of non-bitcoin cryptocurrencies.
“But in the days after the Shanghai (Shapella) upgrade, the decline in correlation between Bitcoin and Ethereum became more pronounced, reminiscent of a similar trend observed during merger events (when Ethereum changed sides). Change proof-of-work mechanism to proof-of-stake) in September 2022.
In theory, the reduced correlation between the two assets strengthens the case for diversification by including them in a portfolio.
Bitcoin Price Chart | Source: TheBlock
Ether Price Chart | Source: TheBlock
Bitcoin and Ethereum prices will increase by around 62% and 50%, respectively, in 2023.
- How to trade ahead of Bitcoin halving in 2024?
- Binance Issues Important Announcement on ETH Staking Withdrawals
According to TheBlock