Ether hasn’t shown notable increase even though the SEC approved Ethereum ETFs on Thursday, March 23. After receiving ETF acceptance, Bitcoin took almost a month before starting a huge bull run that peaked on March 14 at $73,738.00.
Ethereum switched to a proof-of- stake (PoS) system in September 2022, therefore improving sustainability and security. PoS lowers the environmental impact by substituting staking and validators for the energy-intensive computational capability of proof-of- work.
Growing popularity of Ether distributed apps (dApps) is motivating traders to vary their portfolios. Examining the relationship between Bitcoin (BTC) and Ethereum (ETH) would point to an impending Ethereum price explosion.
The correlation between Bitcoin and Ethereum shows in the BTC/ETH relationship. For instance, the ratio is 0.05, hence one ETH costs 0.05 BTC if Bitcoin is $60,000 and Ethereum is $3,000. Should Ethereum’s price climb more quickly than that of Bitcoin, the ratio changes, suggesting more BTC purchase ETH costs.
Ethereum Correlation and Market Performance
With 1 representing identical movement, -1 suggesting opposite movement, and 0 showing no correlation, the correlation coefficient, which runs from -1 to 1, gauges how their prices fluctuate relative to one another.
According to past statistics, Ethereum typically sells more in bull markets. Strong support since then has come from ETH’s constant exceeding of the 0.05 BTC mark during the bull runs of 2018 and 2020. On the other hand, the 0.08 BTC level has been rather resistant three times. The correlation peaked on March 14 when Bitcoin reached its all-time high during its bull run.
In bull markets Ethereum usually performs better than Bitcoin; in bear situations it performs worse. Past performance provides information for more wise decisions even if it does not ensure future outcomes. According to a recent Coinbase analysis, especially following Ethereum’s Shanghai (Shapella) hard fork on April 12, which allowed staked Ether withdrawals, the BTC/ETH ratio has been falling since early 2023. This modelled the 40-day rolling correlation from 0.95 to 0.82 from 0.00 to 0.00.
Though historically BTC and ETH have moved together, factors including ETH switch to PoS, the growth of non-fungible tokens (NFTs), and the acceptance of Ethereum-based dApps are causing their dispersion.
Based on data by IntoTheBlock, 95% of present ETH investments are now profitable; prices have increased 30% over the previous week. Since ETH peaked in November 2021, when this profitability level has not been observed.
Minimal opposition exists for ETH bought at higher prices; 3.57 million ETH bought between $3,800 and $4,800 compared to 53.54 million ETH bought between $2,160 and $2,650. Driven by the higher chances of ETF certification, ETH whales have also made notable movements. ETH’s on-chain trade volume on March 21, 2022, of $15.98 billion was major since June 13, 2022.
Of this volume, 90% of the entire traded volume that day came from transactions exceeding $100,000, usually carried out by whales. $14.33 billion came from this category. After the ETF clearance, this trend is projected to pick speed. The admission of cryptocurrencies signifies a major turning point, hence the approval probably increases activity among ETH whales based on recent high volume transactions. The significant on-chain trading volumes imply increasing institutional and investor trust in Ethereum.
