Home - Bitcoin - Correlation Between Bitcoin and Ether Prices Dips Below 80%

James Carter

May 19, 2023

Correlation Between Bitcoin and Ether Prices Dips Below 80%

The correlation between Bitcoin and Ether prices refers to the statistical relationship or degree of association between the prices of these two major cryptocurrencies. Bitcoin and Ether are both digital currencies, commonly known as cryptocurrencies, that operate on decentralized blockchain networks.

Overview of the Bitcoin and Ether

Historically, Bitcoin has been the dominant and most well-known cryptocurrency, while Ether is the native token of the Ethereum blockchain platform, which supports various decentralized applications (DApps) and smart contracts. As such, both Bitcoin and Ether have significant market capitalizations and attract substantial investor interest.

The correlation between Bitcoin and Ether prices has varied over time. In the early stages of the cryptocurrency market, Bitcoin’s price movements often had a strong influence on the broader market, including Ether. This was primarily due to Bitcoin’s dominance and the fact that it served as a gateway for many investors into the cryptocurrency space.

According to newly released information from a cryptocurrency researcher named Kaiko, the price correlation between Bitcoin and Ether (ETH) has dropped below 80% for the first time since November 2021.

According to the statistics provided by Kaiko, the correlation between the two digital currencies with the highest market value dropped to approximately 78% last week. This represents the correlation between BTC and ETH at its lowest level in the past 18 months.

Between Bitcoin and Ether Prices

When the price correlation between two assets is weaker than it was in the past, this indicates that the prices of the assets move in opposite directions more frequently than they did in the past.

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On the other side, when there is a significant correlation between two variables, this implies that those variables have a tendency to move in the same direction.

BTC and ETH No Longer Correlates

In other words, the most recent data from Kaiko demonstrates that the prices of BTC and ETH no longer correlate as strongly with one another as they formerly did.

This information was disseminated by Kaiko via Twitter on the previous Friday:

Correlation Between Bitcoin and Ether Prices Dips Below 80%, First in 18 Months

It is essential for traders, particularly in particular algorithmic traders who employ particular hedging methods between the two assets, to take note of the weakening correlation between the two assets.

This trend may continue until further ETH is distributed.
In a market update back in April, Coinbase analysts David Duong and Brian Cubellis stated that the correlation between BTC and ETH had been on the slide for some time and that this trend had been continuing for some time.

Performances Between These Two Digital Assets

The analysts observed at the time that “Performances between these two digital assets have otherwise maintained a fairly stable and high correlation through 2022 into 2023,” with the previous noticeable exception being the short period immediately following the Merge.

They continue on to say that there is a number of reason to believe that the trend will continue until additional staked ETH tokens are made available because there is evidence to support this belief.

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They stated, “We think the current period of attenuation could last through this first phase of ETH withdrawals,” and that is exactly what they believe will happen.

The price of ETH/BTC has not changed.

Notably, because there is now a smaller correlation between BTC and ETH, the ETH/BTC trading pair is far more volatile than it was previously.

And while that has most certainly been the case, it is noteworthy to note that the ETH/BTC price stood at nearly the same level 18 months ago as it does today: at 0.066 BTC per ETH. This was the last time the correlation was at this level.