The correlation between bitcoin and ETH returns has been declining since mid-March, when bitcoin started to outperform amid U.S. banking turmoil and tightening banking regulations. Non-bitcoin digital assets, cryptocurrency exchange Coinbase said in a recent research report.
The report noted that the drop in correlation became more pronounced after the Ethereum Shanghai upgrade, aka Shapella, while noting that a similar trend followed the update in September 2022. The network’s previous update, The Merge.
The Shanghai upgrade was successfully implemented on April 13 (UTC), allowing validators to withdraw staked ETH.
Analysts David Duong and Brian Cubellis wrote:
“This bearish correlation plays an important role in guiding institutional quant strategies based on hedging one asset against another (or using ETH as a hedge against altcoins. Illiquid)”.
Fundamentally, “it supports the diversification argument in favor of holding both BTC and ETH,” they wrote.
The weakening of the 40-day correlation of daily returns could continue for another two weeks as the upgraded ETH withdrawal period remains in effect, the report said.
Coinbase estimates that as of April 20, partial withdrawals could unlock an additional 73,000 ether, and full withdrawals could unlock 822,000 ether.
- There are currently 23.7 million addresses holding 0.01 ETH
- ETH Price Prediction After Shapella Upgrade
According to Coindesk