Bitcoin’s Correlation with Ether Drops Below Average
Bitcoin’s 60-day correlation with ether has fallen below its average of 70% for the first time in three years, suggesting a shift in the relationship between the two largest cryptocurrencies. The last time this metric dropped was in early 2021, coinciding with bitcoin’s price discovery phase after breaking its previous all-time high.
In correlation metrics, a value of 1 represents a perfect positive correlation, while a value of 0 indicates no correlation and -1 represents a perfect negative correlation. The drop below 70% means that the prices of bitcoin and ether are not moving in sync as much as they have been in recent years.
Will Spot Ether ETF Hype Drive a Comeback?
The decrease in correlation follows the launch of spot bitcoin ETFs in the US, leading to speculation that potential spot ether ETF approvals from the SEC could be next. Bitcoin has benefited from ETF hype and speculation, while ether experienced a slower rally. The approval of spot ETFs is currently seen as the strongest narrative for ether.
Last week, ether spot volumes on centralized exchanges reached their highest level since the collapse of FTX. However, derivatives markets and ether futures ETFs have not shown signs of traders preparing for a rally.
Speculation Over Potential Approval in May
Bloomberg ETF analyst Eric Balchunas estimated a 70% possibility for spot ether ETF approval by May, but TD Cowen and JPMorgan are less optimistic about approval in the near future. If ETFs don’t generate enthusiasm for ether, there are other narratives such as new Layer 2 solutions or the success of EigenLayer and restaking.
Uncertainties remain regarding spot ether ETF approvals due to SEC Chair Gary Gensler’s stance on cryptocurrencies. However, former SEC Director of Corporate Finance William Hinman previously stated that, considering its decentralized nature, ether is not a security.
Hot Take: Ether’s Performance Amid ETF Speculation
Ether has seen a 6% decline since the launch of spot bitcoin ETFs but remains up 9% year-to-date. In comparison, bitcoin has fallen around 10% over the past week and is down over 2% since the beginning of the year. Currently trading at $2,480, ether’s price continues to be influenced by ETF speculation.
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