Bitcoin-Ethereum correlation: how the market changed its dynamics

The spotlight on Bitcoin has only gotten brighter in the past couple of years. And yet, Ethereum also managed to stand beside it. In fact, the two assets have succeeded in galvanizing a passionate community, with the rivalry between the promoters of each asset being fierce. While Bitcoin remains head and shoulders in terms of market capitalization, valuation alone no longer matters.

Source: Coinstats

The world’s largest altcoin has managed to outperform Bitcoin on several occasions over the past few months. Now, however, the two assets could become more consistent in terms of responsiveness and market movement.

Bitcoin and Ethereum: irrelevant competition?

According to a recent report from Ecoinometrics, the net performance and risk-adjusted returns of cryptoassets have been split in the middle over different time frames.

Bitcoin has performed slightly better since the start of 2019, growing at 1303% versus 1184% for Ethereum. On the contrary, Ethereum has triumphed over the past 12 months, with an ROI of 664% compared to BTC’s 484%.

Although their growth rates differ in real terms, they are still quite close to each other. How did it happen? Well, one of the main reasons for this is the increased correlation between Bitcoin and Ethereum over the past three years.


Source: Ecoinometry

As of the start of 2018, the BTC-ETH correlation has not fallen below 50%, with the same above 60%, at the time of publication. While there is relative truth to the claim that Bitcoin is driving most of the altcoin market growth on charts, the introduction of DeFi has also helped Ether grow individually.

There is a vested interest with both assets

It is undeniable that Bitcoin and Ethereum have received the most attention from the financial ecosystem, more than any other asset. In fact, significant institutional capital flows have largely focused on the top two pieces of the market. Ergo, it makes sense that their movements are more intertwined than before.

Source: TradingView

The last draw on the charts was also quite comparable. As both assets have fallen by a similar percentage of value over the past 24 hours, a marked difference from March 2020 can be seen. At that time, Ethereum was down 85%, compared to Bitcoin’s 67%.

While the above dataset is not complete, it’s hard to deny the improved co-dependency of Bitcoin and Ethereum over the past 2 years.

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