Ethereum

Based

Bitcoin ETF

April

<ul>
 <li><em>The decoupling was most likely due to an increase in spot ETH ETF launches.</em></li>
 <li><em>A lower BTC-ETH correlation made a case for portfolio diversification.</em></li>
</ul>
<p><a href="https://eng.ambcrypto.com/search/bitcoin" target="_blank" rel="noopener noreferrer nofollow" data-wpel-link="internal">Bitcoin’s [BTC]</a> correlation with <a href="https://eng.ambcrypto.com/search/ethereum" target="_blank" rel="noopener noreferrer nofollow" data-wpel-link="internal">Ethereum [ETH]</a> dropped to multi-year lows, signaling a major divergence in the growth trajectories of the two blue-chip cryptocurrencies.</p>
<p>Based on a 60-day rolling window, the correlation dipped to 75% in November, according to crypto market data provider <a href="https://x.com/KaikoData/status/1731639787096772771?s=20" target="_blank" rel="noopener noreferrer nofollow" data-wpel-link="external">Kaiko</a>. This was a marked departure from the all-time highs (ATH) of 97% seen during the end of 2022.</p>
<div id="attachment_81011" style="width: 100%" class="wp-caption aligncenter"><a href="https://engamb.sfo2.digitaloceanspaces.com/wp-content/uploads/2023/12/05125621/Bitcoin-with-Ethereum.jpg" data-wpel-link="external" target="_blank" rel="noopener noreferrer nofollow"><img aria-describedby="caption-attachment-81011" loading="lazy" class="size-full wp-image-81011" src="https://engamb.sfo2.digitaloceanspaces.com/wp-content/uploads/2023/12/05125621/Bitcoin-with-Ethereum.jpg" alt="" width="1310" height="700" srcset="https://engamb.sfo2.digitaloceanspaces.com/wp-content/uploads/2023/12/05125621/Bitcoin-with-Ethereum.jpg 1310w, https://engamb.sfo2.digitaloceanspaces.com/wp-content/uploads/2023/12/05125621/Bitcoin-with-Ethereum-300x160.jpg 300w, https://engamb.sfo2.digitaloceanspaces.com/wp-content/uploads/2023/12/05125621/Bitcoin-with-Ethereum-1024x547.jpg 1024w, https://engamb.sfo2.digitaloceanspaces.com/wp-content/uploads/2023/12/05125621/Bitcoin-with-Ethereum-768x410.jpg 768w" sizes="(max-width: 1310px) 100vw, 1310px"></a>
 <p id="caption-attachment-81011" class="wp-caption-text">Source: Kaiko</p>
</div>
<h4>Ethereum weakens its relationship with Bitcoin</h4>
<p>AMBCrypto spotted a vertical drop in the relationship since November. While there was no telling evidence, the decoupling seemed to be caused by an increase in spot ETH exchange-traded fund (ETF) launches.</p>
<p>The broader market bullishness was led by excitement over likely approvals of a dozen-odd spot Bitcoin ETF applications. This led to the start of the mid-October rally and by the time the month ended, BTC had accumulated gains of 26%.</p>
<p>However, ETH was slow to match this pace, finishing October with 17% gains.</p>
<div id="attachment_81020" style="width: 100%" class="wp-caption aligncenter"><a href="https://engamb.sfo2.digitaloceanspaces.com/wp-content/uploads/2023/12/05132033/Bitcoin-BTC-13.20.09-05-Dec-2023.png" data-wpel-link="external" target="_blank" rel="noopener noreferrer nofollow"><img aria-describedby="caption-attachment-81020" loading="lazy" class="size-full wp-image-81020" src="https://engamb.sfo2.digitaloceanspaces.com/wp-content/uploads/2023/12/05132033/Bitcoin-BTC-13.20.09-05-Dec-2023.png" alt="" width="2560" height="867" srcset="https://engamb.sfo2.digitaloceanspaces.com/wp-content/uploads/2023/12/05132033/Bitcoin-BTC-13.20.09-05-Dec-2023.png 2560w, https://engamb.sfo2.digitaloceanspaces.com/wp-content/uploads/2023/12/05132033/Bitcoin-BTC-13.20.09-05-Dec-2023-300x102.png 300w, https://engamb.sfo2.digitaloceanspaces.com/wp-content/uploads/2023/12/05132033/Bitcoin-BTC-13.20.09-05-Dec-2023-1024x347.png 1024w, https://engamb.sfo2.digitaloceanspaces.com/wp-content/uploads/2023/12/05132033/Bitcoin-BTC-13.20.09-05-Dec-2023-768x260.png 768w, https://engamb.sfo2.digitaloceanspaces.com/wp-content/uploads/2023/12/05132033/Bitcoin-BTC-13.20.09-05-Dec-2023-1536x520.png 1536w, https://engamb.sfo2.digitaloceanspaces.com/wp-content/uploads/2023/12/05132033/Bitcoin-BTC-13.20.09-05-Dec-2023-2048x693.png 2048w" sizes="(max-width: 2560px) 100vw, 2560px"></a>
 <p id="caption-attachment-81020" class="wp-caption-text">Source: Santiment</p>
</div>
<p>However, the announcement of spot ETH ETFs by TradFi giants such as BlackRock and Fidelity turned it around for ETH in November. The second-largest crypto bounced above the crucial barrier of $2,000 for the first time since May 2022.</p>
<p>To put it simply, ETH reacted more to developments in its own ecosystem rather than a trickle-down effect.</p>
<p>It is important to understand that both assets function very differently from each other.</p>
<p>Notably, Ethereum is used as a platform for the development of decentralized applications (dApps) and smart contracts. Meanwhile, Bitcoin is primarily used as a store of value and a means of payment.</p>
<h4>What is the takeaway for investors?</h4>
<p style="text-align: left;">As per a 21 April report by&nbsp;<a href="https://www.coinbase.com/institutional/research-insights/research/weekly-market-commentary/lower-btc-vs-eth-correlation-april-21-2023#:~:text=Based%20on%20a%2040%2Dday,the%20January%20low%20of%200.85." target="_blank" rel="noopener noreferrer nofollow" data-wpel-link="external">Coinbase</a>, the lower BTC-ETH correlation makes a case for portfolio diversification, as holding both assets can result in higher returns.</p>
<p style="text-align: left;">Smart investors spread their investments across different cryptos, reducing their exposure to any one category.</p>
<p style="text-align: center;">Read <a href="https://ambcrypto.com/predictions/bitcoin-price-prediction" target="_blank" rel="noopener noreferrer nofollow" data-wpel-link="internal">Bitcoin’s [BTC] Price Prediction</a>&nbsp;2023-24</p>
<p style="text-align: left;">As for institutional investors, the trend could impact their trading strategies like cross-hedging. For the curious, cross-hedging is a practice of managing risk by investing in two assets that have similar price movements but are not perfectly correlated.</p>
<p>Having said that, traders and investors should not take these as investment advice, and instead perform their due diligence.</p>
<p>The post <a rel="noopener noreferrer nofollow" href="https://eng.ambcrypto.com/ethereum-decouples-from-bitcoin-examining-the-causes/" data-wpel-link="internal" target="_self">Ethereum decouples from Bitcoin: Examining the causes</a> appeared first on <a rel="noopener noreferrer nofollow" href="https://eng.ambcrypto.com" data-wpel-link="internal" target="_self">AMBCrypto</a>.</p>

Ethereum decouples from Bitcoin: Examining the causes

AMBCrypto

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