Bitcoin And Ethereum Correlation At A Staggering 97%, BTC Rally Incoming?

Dalmas Ngetich

1 year ago

3 mins read

Reason to trust

Strict editorial policy that focuses on accuracy, relevance, and impartiality

Created by industry experts and meticulously reviewed

The highest standards in reporting and publishing

How Our News is Made

Strict editorial policy that focuses on accuracy, relevance, and impartiality

Ad discliamer

Morbi pretium leo et nisl aliquam mollis. Quisque arcu lorem, ultricies quis pellentesque nec, ullamcorper eu odio.

As Q1 2023 comes to a close, the Bitcoin and Ethereum correlation stands at a staggering 97%, trackers indicate.

The Bitcoin And Ethereum Price Correlation

Bitcoin and Ethereum are the world’s most valuable coins by market cap. Because of their first mover advantage, Bitcoin, the first blockchain network; and Ethereum, a legacy smart contracting platform; their native currencies, BTC and ETH, are also the most liquid and increasingly correlating in price movements.

Bitcoin and Ethereum Prices On March 31| Source: Binance On TradingView

At the time of writing on March 31, trackers show that the average daily trading volumes of BTC and ETH trading volumes across various exchanges stood at $19.7 billion and $8.4 billion, respectively.

The two coins are also listed in almost all popular centralized cryptocurrency exchanges. Notably, because of the smart contracting capability of Bitcoin, the coin has been tokenized. Billions have been deployed on Ethereum, and other smart contracting platforms. There, BTC holders engage in DeFi and other activities not possible on the Bitcoin mainnet.

That Bitcoin and Ethereum prices have been moving in lockstep over the past few months could be attributed to several factors. However, what stands out is that these coins are the most liquid in the space, with an active base justifying their mega valuations. Their coins can also be quickly shuttled across exchanges without liquidity concerns, attracting macro investors.

Why The Correlation?

Bitcoin has long been viewed as a store of value asset and a medium of exchange. The coin has a limited total supply of 21 million, and over 90% have been mined.

Proponents hold that during a crisis in traditional finance, the coin can be a hedge. This was recently observed following the bank run at Silicon Valley Bank (SVB) and the closure of Signature Bank.

Besides, crypto holders also prefer the coin whenever there are concerns in the industry. Days after the temporary de-pegging of USDC, a stablecoin, Bitcoin prices rose.

Meanwhile, Ethereum is comparatively liquid and is becoming deflationary, a reason why a section of its supporters say ETH, its native currency, would become “ultra sound money,” better than BTC and gold.

“a large portion of the Ethereum ecosystem wants ETH to be ultra sound money”pic.twitter.com/3MI2nDHaXe

— ultra sound money 🦇🔊 (@ultrasoundmoney) July 5, 2021

Aside from liquidity, Ethereum is the largest and most active smart contracting platform. DeFiLlama data shows that over 50% of DeFi’s total value locked (TVL) is in Ethereum-based dapps.

The correlation may continue rising in the months ahead as crypto gains mainstream adoption. Macro investors would most likely gravitate to BTC and ETH, lumping them as risk assets as they diversify their portfolios.

Regulatory clarity, with the United States Security and Exchange Commission (SEC) chairman saying Bitcoin is a commodity while the Commodity Futures Trading Commission (CFTC), in a lawsuit against Binance and its CEO, Changpeng Zhao, also classifying ETH as a commodity, could further boost this correlation.

CFTC says that Bitcoin, Ethereum, and Litecoin are Commodities pic.twitter.com/nSNX2YIYLP

— Conor (@jconorgrogan) March 27, 2023

Still, it is yet to be seen how Bitcoin prices will react ahead and after the Shanghai Upgrade on Ethereum in mid-April.

Feature Image From Canva, Chart From TradingView

Dalmas Ngetich

Dalmas, a seasoned crypto reporter, brings a unique perspective to the industry. His specialization in NFTs, blockchain, DeFi, and blockchain news for NewsBTC, combined with a background in mechanical engineering and over a decade of experience in journalism, has allowed him to craft over 10,000 news and feature articles over the past eight years. His diverse range of topics, including technology, Forex, and finance, reflects his comprehensive understanding of the crypto landscape.

His technical expertise and analytical skills have been recognized and featured by leading news outlets such as Investing.com, CoinTelegraph, Entrepreneur, Forbes, and other authority sites. Notably, he broke key news, including the Ripple and MoneyGram partnership, cementing his position as a thought leader in crypto.
The news exploded. Over 100,000 people devoured this meticulously crafted report, from seasoned investors to curious newcomers. His analysis wasn't just dry facts and figures; it crackled with insight, dissecting the implications of the partnership and its potential impact on the future of finance.

His deep understanding of the financial markets, technological advancements, and blockchain developments has made him a respected voice in the industry.

Dalmas is also the founder of BTC-Pulse, a crypto news site, further demonstrating his commitment to the field. He firmly believes that DeFi and NFTs are here to stay and will continue to drive financial inclusion.

Coming from Nairobi, Kenya, it is easy to see the source of his inspiration: Across Africa, millions lack access to traditional banks. Remote villages, limited documentation, and high minimum balances create insurmountable barriers.

DeFi, not just Maker or Aave, for example, but think of Bitcoin and USDT, cuts out the middleman. Forget banks with their limitations.
Even so, DeFi isn't a magic solution. The continent still struggles with reliable internet access, and educational campaigns highlighting the benefits of this wonderful solution are insufficient. Moreover, even for those interested, understanding DeFi can look like learning a new language.

Dalmas is here to help make the tech easy to understand and digestible, even for beginners.
The story of DeFi in Africa is still being written. Challenges abound, but the promise of a more inclusive financial future is a powerful motivator. With innovation and collaboration, Dalmas firmly believes that DeFi could become the key to unlocking Africa's full economic potential.
This possibility and its immense value motivate Dalmas to continue breaking key DeFi innovations and more across the globe. His engineering background further enhances his ability to deliver well-thought-out pieces that blend technical insight with clear, impactful reporting.

Beyond his professional achievements, Dalmas is deeply passionate about technology and politics. Policies drive adoption, and being at the forefront and keeping up with how they evolve is crucial for the sphere to mature.

When Dalmas is not closely monitoring the latest crypto events, he can be found in nature, exploring the picturesque countryside, and traveling with his family and friends. His love for adventure and discovery perfectly complements his investigative and reporting skills.
You can connect with Dalmas on X: @Dalmas_Ngetich, or contact him on Telegram @Dalmas_Ngetich.

Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.