Bitcoin and Ethereum Correlation Drops for the First Time in 18 Months
Bitcoin and Ethereum are two of the largest cryptocurrencies in the world, with a combined market capitalization of over $1 trillion. The two currencies have often been closely correlated, with their prices moving in tandem with each other. However, recent data from crypto intelligence tracker Kaiko data has revealed that the 30-day correlation between the two assets has dropped below 80% for the first time in 18 months.
Altcoin Struggles
One of the main effects of the drop in correlation between Bitcoin and Ethereum has been the impact on altcoins. Although Bitcoin remains uncorrelated with US equities, altcoins have not been able to exercise the same level of independence. As Bitcoin tries to recover above $27,000, altcoins in the top 30 are struggling to recover from their recent pullback.
Ethereum Tokens
One of the most significant impacts of the declining correlation between Bitcoin and Ethereum relates to Ethereum’s ecosystem tokens and Layer 2 assets. These assets are typically correlated with Ethereum, meaning a drop in correlation could lead to lower volatility in response to macro-market-moving events.
Since the drop in correlation between Bitcoin and Ethereum, experts have been closely monitoring prices and on-chain activity for any signs of a recovery. While Bitcoin’s price has wiped out its US CPI-induced gains, Ethereum has seen a modest 2.5% climb since Friday. The rising ETH deposits in the Shanghai contract have also raised hopes that Ethereum and its ecosystem tokens are poised for recovery.
Overall, the decline in correlation between Bitcoin and Ethereum is a significant event in the crypto world. If the trend continues, it could lead to lower volatility in the market, which could be good news for investors. However, it remains to be seen whether the correlation will continue to drop, or if it will bounce back in the coming weeks and months.
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