Historically, bitcoin (BTC) and ether (ETH) are linked in market movements. A recent study conducted by Kaiko Research on this subject shows a certain reversal of this crypto trend.
Decoupling of bitcoin and ether linked to market slowdown
Bitcoin (BTC) and ether (ETH), once closely linked in their market movements, are experiencing significant decoupling. As a recent study from Kaiko Research highlights, the correlation between these two major cryptos is at its lowest level since 2021.
This change in dynamic comes amid a broader slowdown in the crypto market. Indeed, the prices of bitcoin and ether have fallen by almost 6% over the past week to currently stand at $41,757 and $2,472, respectively.
Traditionally, the correlation between bitcoin and ether has been closely tied, generally holding around the 0.71 mark. However, the recent divergence raises key questions about Ethereum’s future trajectory.
Notably because its trading volume is increasing without concomitant signs of a recovery in the derivatives market. This situation stands in stark contrast to bitcoin, which has seen substantial growth pending ETF approval.
What does this trend mean?
Analyzing the recent performance of bitcoin (BTC), it is evident that the flagship crypto has achieved an impressive 100% return over the past year. A performance which exceeds the 60% gains of ether (ETH) over the same period.
But the approval of Bitcoin Spot ETFs appears to have been a turning point in the dynamics of the two cryptos. A change that led to a fall in the price of BTC and a recovery in ETH fueled by speculation around the upcoming approval of an Ethereum Spot ETF.
This scenario highlights the changing dynamics between bitcoin (BTC) and ether (ETH). The Bitcoin Spot ETF’s journey appears to have played a role in strengthening the asset’s presence in the market. While the path forward for ETH seems less clear.
The decrease in correlation with BTC suggests the possibility of independent behavior of ETH in the market. However, the lack of traditional rally indicators in derivatives markets and the abandonment of ETH beta assets after the Bitcoin ETF approval injects a level of uncertainty. Particularly regarding the future trajectory of ETH.
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