BTC-ETH correlation closing in on ATH; here’s what might be next
Many crypto traders invested their hard-earned savings in Bitcoin, only for it to behave like.. .an alt? A report from Arcane Research took a closer look at this phenomenon, to better understand whether Bitcoin, Ethereum, and even some other assets are giving each other enough space.
Back in 2017, while some ETH/altcoins correlation could be observed, altcoins still charted their own path. However, 2018 showed Ether and altcoins falling into formation and recording a higher correlation. The Arcane Research report explained,
“The 90-day correlations in the crypto market are approaching the highs from the bear market of 2018 and 2019. This paints a picture of an overall risk-averse sentiment in the market.”
However, the all-time high in terms of correlation remains 0.95 from May 2020. The market has not reached this stage just yet.
However, it’s not all volatility and confusion. Arcane Research noted,
“Interestingly, previous high correlation periods were caused by sudden sharp sell-offs, whereas the recent trend has seen a steadier growth.”
Source: Arcane Research
So, what does the data spell out for investors? For starters, investors who bought altcoins to hedge against Bitcoin-related risks might want to take a second look at their portfolio, to make sure it’s still diverse enough. Furthermore, investors who have already started reacting to this trend might instead resort to risk-averse strategies in the near future.
This development comes as experts and analysts debated whether or not Bitcoin was lining up a little too closely with the S&P500 – or uncoupling from it. Add the FUD surrounding the Russia-Ukraine War into the mix, and you can understand why contradictory statements and an aversion to risk seem to hang heavy in the
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