This week, Bitcoin’s rolling 30-day correlation with Ethereum fell below 80% for the first time since November 2021, according to Kaiko.
The declining correlation indicates that the two largest cryptocurrencies are less dependent on each other, with their prices moving in different directions more frequently. The correlation between Bitcoin and Ethereum prices fell below 80% for the first time since November 2021, signaling a major shift in the relationship between the two largest cryptocurrencies.
The 30-day rolling correlation between Bitcoin and Ethereum dropped to about 78% this week, according to data provider Kaiko. Correlation measures the extent to which the prices of two assets move together. When correlations are low, it means their prices move in different directions more often.
In other words, declining correlation means that the prices of BTC and ETH are no longer as closely correlated as they used to be.
Bitcoin’s correlation with Ether drops
Last month, Coinbase analyzed the correlation between BTC and ETH returns. The exchange concluded that Bitcoin has been falling since mid-to-late March as it began to outperform other cryptocurrencies amid U.S. banking turmoil and increased regulatory scrutiny of non-Bitcoin cryptocurrencies. .
“But the decline in this relationship became even more pronounced in the days following the Shanghai (Shapella) fork, reminiscent of a similar trend observed during the merger in September 2022 (when Ethereum changed its consensus mechanism to proof of stake )," Coinbase said at the time.
In theory, a declining correlation between two assets strengthens the case for diversification by including both assets in a portfolio.
According to The Block’s data dashboard, Bitcoin and Ethereum prices are up around 62% and 50% respectively so far in 2023.
