- Kaiko Research highlighted that the correlation between Bitcoin and Ethereum has dropped below 0.71 for the first time since 2021.
- The approval of Spot Bitcoin ETFs marked a significant moment; while BTC prices were falling, ETH rallied on speculation that it could receive ETF approval.
- After the ETF approval, this trend reversed, and as beta tokens experienced a decline, ETH showed relative resilience by recording the smallest drop.
According to data reported by Kaiko, the correlation between Bitcoin and Ethereum has reached its lowest level since 2021.
Decline in Bitcoin and Ethereum Correlation
Kaiko Research emphasized that the correlation between Bitcoin and Ethereum has dropped below 0.71 for the first time since 2021. This development occurred amidst a general market downturn, with BTC and ETH prices both falling by approximately 6% last week and currently standing at $40,991 and $2,463, respectively.
Throughout history, BTC and ETH have exhibited a strong correlation in market movements. However, the recent divergence, especially without a rally in the derivative markets, raises questions about the future trajectory of ETH. This phenomenon presents a sharp contrast, particularly against the backdrop of significant growth in the BTC market due to ETF approvals.
Looking at Bitcoin’s past, it is evident that BTC has shown a remarkable 100% return in the last year, while Ethereum has gained 60%. The approval of Spot Bitcoin ETFs marked a significant moment; while BTC prices were falling, ETH rallied on speculation that it could receive ETF approval.
Ethereum Takes the Spotlight Again
Investors had previously focused on “ETH beta” tokens closely tied to Ethereum but with higher volatility, such as Optimism (OP) and Arbitrum (ARB). However, after the ETF approval, this trend reversed, and these beta tokens experienced a decline, while ETH showed relative resilience by recording the smallest drop.
The current scenario highlights the evolving dynamics between Bitcoin and Ethereum. While BTC’s ETF journey catalyzes its market presence, the path for Ethereum appears less clear. The decreasing correlation with Bitcoin seems to suggest potential independent market behavior. However, the lack of traditional rally indicators in derivative markets and the shift away from ETH beta tokens after BTC ETF approval create uncertainty.
