Bitcoin-Ether Correlation Dips Below 80% For First Time In 2 Years, What It Means?

Crypto News: A substantial change in the relationship between the world’s two largest cryptocurrencies was recently observed as the correlation between the prices of Bitcoin and Ether dropped below 80% for the first time since November 2021. In simpler words, the declining correlation between BTC and ETH prices indicates that both digital assets are no longer moving in tandem to the same extent as they once did.

Bitcoin’s Correlation With Ether

This week, the rolling 30-day correlation between Bitcoin and Ether dropped to approximately 78%, as indicated by the data from Kaiko. Correlation is a measure of how closely two assets’ prices move together and when this correlation falls, asset prices typically respond differently to broader macroeconomic conditions and other crucial events.

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The price of Bitcoin has recently lost its relationship with the stock market in the United States. This occurred while the price of Bitcoin was rising amid a time of increased regulatory scrutiny. Ethereum, on the other hand, has significantly surged due to its Shanghai (Shapella) hard fork, which is reflective of a similar trend seen in September 2022 during the Merge — when Ethereum converted its consensus method to proof-of-stake.

What It Means For Crypto?

Tokens and assets of Layer 2 projects that are part of the Ethereum ecosystem are predominantly linked to the price movement of ETH. As the link between Ethereum and Bitcoin continues to weaken, ETH and other tokens in the ERC-20 ecosystem may experience lesser volatility in response to large-scale events that can potentially shift markets.

Earlier, the volatility of Bitcoin’s price had a significant impact on the prices of ETH and other altcoins traded on the crypto market. However, with this crucial development, it’s possible that things won’t be the same going forward, where ETH and ETH-based coins react differently to the price of Bitcoin. Moreover, due to the fact that the drop has happened for the first time since November 2021, further price divergence between the two flagship assets is anticipated given the current state of the market.

According to data obtained, the values of BTC and Ether have increased by nearly 61.8% and 50.05% so far in 2023, respectively. As things stand, the price of Bitcoin is currently exchanging hands at $26,850 while Ethereum is trading close to the $1,800 price mark.

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