According to data from Kaiko, Bitcoin’s 60-day correlation with Ethereum has fallen below 70 percent. The weakening correlation comes following the launch of spot Bitcoin ETFs in the US, with speculation that potential spot Ethereum ETF approvals are in the pipeline. This development marks a significant shift in the relationship between the two largest cryptocurrencies.
Bitcoin’s correlation with Ethereum dropped below 0.7
The metric last fell below that level in early 2021, according to data from Kaiko Research. At the time, Bitcoin had broken its all-time high. In correlation measurements between assets, a value of 1 (100%) represents a perfect positive correlation. This means that assets move in exactly the same direction and with the same magnitude. On the other hand, a value of 0 (0%) indicates no correlation. Additionally, a value of -1 (-100%) means that assets move in exactly opposite directions with the same magnitude. So, in this case, a drop below 70% means that the prices of assets are not moving as synchronously as they have in the last few years.
Will the Spot Ethereum ETF craze trigger a comeback?
The drop in correlation follows the launch of spot Bitcoin ETFs in the US last week. Speculation that the SEC’s potential spot ETH ETF approvals are in the pipeline has put the spotlight on the leading altcoin. Kaiko makes the following assessment on this subject:
It’s no coincidence that this happened on the same day Bitcoin spot ETFs began trading. The two crypto assets have been diverging in price activity for months, as BTC has benefited from ETF hype and speculation while ETH has enjoyed a relatively muted rally. Since Merge, Ethereum has had a number of narratives, including deflation and ultra money, Layer 2s, liquid staking derivatives, re-staking, and now ETFs with danksharding on the horizon. Despite all these competing narratives, the potential approval of spot ETFs appears to be the strongest narrative at the moment.
According to Kaiko, last week Ethereum spot volumes on centralized exchanges rose to their highest level since the collapse of FTX. However, even with expectations surrounding a potential spot ETF this year, derivatives markets have not shown signs that their traders are preparing for a rally. Kaiko also notes that Ethereum futures ETFs have been trading slowly for several months.
Speculation over possible ratification in May
Last week, Bloomberg ETF analyst Eric Balchunas estimated there was a 70% chance of approval of spot Ethereum ETF funds from the SEC by May, with the first final decision date on Ark Invest and 21Shares’ application expiring on May 23. But the SEC is unlikely to approve spot ETH ETFs “any time soon,” according to investment bank TD Cowen. JPMorgan sees a more than 50% chance of spot ETH ETF approval by May. Kaiko makes the following statement:
While ETFs have been one of the most catalytic narratives in BTC’s history, it remains to be seen whether ETH can repeat this. However, there are many narratives that ETH can rely on; If ETFs don’t spur enthusiasm, maybe new Layer 2s or the success of EigenLayer and restaking will.
cryptokoin.comAs you follow from , SEC Chairman says that cryptos other than Bitcoin are securities. Given its stance in this direction, uncertainties remain surrounding spot Ethereum ETF approvals.
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