Ethereum has formed a record-high correlation with Bitcoin over the past couple of weeks
This comes as ETH’s movements start aligning with those seen by BTC in a way that hasn’t been seen before
If this correlation persists, the cryptocurrency’s next trend could largely depend on that of BTC
That being said, this could suggest that Ethereum is poised to see some notable near-term losses, as analysts widely believe Bitcoin is positioned to see some major downside in the coming weeks and months
Ethereum and the entire cryptocurrency market is currently lacking direction. Although many altcoins are caught within firm uptrends, Bitcoin’s price has remained stuck within the lower-$9,000 region.
This has done little to offer investors with insight into where the entire market might trend throughout the rest of the year.
There is a strong possibility that Ethereum’s near-term price action will remain highly dependent on that of the benchmark digital asset.
One analyst recently pointed to some data showing that ETH is now more correlated with Bitcoin than it has been in years.
This means that an imminent BTC decline could drag Ethereum lower as well.
Ethereum Movements are Becoming More In-Line with Those Seen by Bitcoin
Ethereum’s price action has always remained closely tied to that of Bitcoin, although it typically outperforms the benchmark cryptocurrency during uptrends, and underperforms it during downtrends.
This trend appears to be shifting, however, as data seems to indicate that the cryptocurrency is now closely tracking the percentage movements seen by BTC.
One data analyst spoke about this in a recent tweet, explaining that ETH may not be the same “high beta” play as it once was due to the prevalence of this trend.
“ETH moves vs. BTC have gotten tighter over the years. In 2015-17, ETH would appreciate 6-8% vs BTC on days when it was up & fall 4-6% on days it was down. Even in 2020, where ETH has seen a rebound, these moves continue to get smaller. Not the same ‘high beta’ play anymore.”
Data Source: Ceteris Paribus
Bitcoin Could Soon Place Some Intense Pressure on ETH
Because Ethereum is highly correlated to Bitcoin at the present moment, it is unlikely that it will be able to avoid any losses as the result of a BTC downtrend.
As Bitcoinist reported earlier this week, the likelihood of a sharp price decline is growing as Bitcoin continues trading sideways.
One analyst cited within the report said:
“The deeper we get into this BTC semi-slanted descending triangle-like thing the more likely I think it breaks to the downside.”
Image Courtesy of Jonny Moe. Chart via TradingView.
Assuming that Ethereum continues closely tracking Bitcoin’s percentage gains and losses, it is unlikely that it will be able to avoid the headwinds created by BTC’s potentially imminent decline.
Featured image from Unsplash.
Charts and pricing data from TradingView.
Bitcoinist.com is author of this content, TheBitcoinNews.com is is not responsible for the content of external sites.
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