CoinDesk Analysis Team
CoinDesk
The correlation between bitcoin (BTC) and ether (ETH) returns has been declining since mid-March, when BTC started outperforming against the backdrop of the U.S. banking turmoil and increased regulatory scrutiny of non-bitcoin digital assets, Coinbase (COIN) said in a research report Friday.
The decline in the relationship has become more pronounced following the Ethereum blockchain’s Shanghai upgrade – aka Shapella, the report said, noting that a similar trend was seen in September 2022 following the network’s previous update, the Merge.
The Shanghai upgrade was successfully completed on April 12 and enables validators to withdraw staked ether.
“The relevance of this falling correlation for institutional investors is that it can affect quantitative strategies that rely on cross hedging one asset for the other (or using ETH as a hedge for less liquid altcoins),” analysts David Duong and Brian Cubellis wrote.
From a fundamental perspective “it supports diversification arguments in favor of holding both BTC and ETH,” they wrote.
The weakening in the 40-day correlation of daily returns may continue for another two weeks because the initial phase of ether withdrawals following the upgrade is still in effect, the note said.
Coinbase estimates that as of April 20 an additional 73,000 ether could be unlocked in partial withdrawals and 822,000 unlocked in full withdrawals, and this could take about 15 days to process.
All writers’ opinions are their own and do not constitute financial advice in any way whatsoever. Nothing published by CoinDesk constitutes an investment recommendation, nor should any data or Content published by CoinDesk be relied upon for any investment activities. CoinDesk strongly recommends that you perform your own independent research and/or speak with a qualified investment professional before making any financial decisions.
Recommended Content
Editors’ Picks
Celebrity meme coins controversy continues amid Pump.fun revenue dominance
Pump.fun outperformed the Ethereum blockchain on Tuesday after raking in $1.99 million. Following this achievement, a meme coin based on actress Sydney Sweeney was the subject of controversy after its developers dumped their bags on investors.
PEPE's on-chain metrics indicate potential rally after weeks of silence
PEPE has struggled to see any significant price move after reaching an all-time high in May. Increased adoption rate and low MVRV ratio indicate a bullish run may be on the horizon. A single PEPE outflow from Binance worth $14.7 million gives credence to signs of bullish expectation.
Ethereum has failed to overcome key resistance despite bullish sentiment surrounding ETH ETF
Ethereum (ETH) is down more than 1.4% on Tuesday following another ETH sale from the Ethereum Foundation. Meanwhile, crypto exchange Gemini's recent report reveals that ETH ETF could see about $5 billion in net inflows within six months of launch.
Crypto community blasts Polkadot following report of treasury spending
Polkadot reports $87 million of treasury spending during H1. Crypto community members expressed harsh feelings toward the DOT team's high spending. DOT is up more than 2% in the past 24 hours but risks correction following the report.
Bitcoin: BTC price correction could end in July, according to seasonal data
Bitcoin (BTC) price appears poised for a decline this week, influenced by slight outflows in US spot ETFs, selling activity among BTC miners, and a combined transfer of 4,690.28 BTC to centralized exchanges by the US and German governments.