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Keep an eye on this if you’re holding Bitcoin, Ethereum

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Bitcoin and Ethereum may feel risky to hold when considering the ongoing COVID-19 pandemic, the Russia-Ukraine War, rising inflation rates, and other global events. In fact, prices have been darting between red and green in a matter of days, if not hours, and investors are on high alert. However, data seems to suggest that there’s more nuance to it all.

Pick up your baseball bats

Noting that crypto had entered the “big leagues” of finance, Messari acknowledged that investors might expect Bitcoin and Ether to correlate to the movements of high-risk stocks. However, that does not seem to be the case when comparing BTC and Ether to the Russell 2000 growth index.

When BTC and ETH’s correlation to Russell 2000 growth was mapped out, the correlation was above 80% between late 2020 and early 2021. But the very next year, the correlation dropped to below zero.

In 2022, however, the BTC correlation was above 20% while the ETH correlation was above 0%. The average correlation was about 35% and 30%, respectively.

Messari isn’t alone in concluding that Bitcoin and Ethereum have made it big at last. In fact, venture firm co-founder and author Chris Burniske claimed that BTC and ETH were the “developed markets” of crypto.

At press time, some recovery seemed to be underway though. Bitcoin was trading close to $40,000 on the charts, having hiked by 5% over the last week. Meanwhile, ETH was changing hands at $2,808.

A true connection?

It might not be time just yet for investors to breathe a sigh of relief, however, as Bitcoin’s correlation to equities is still going strong. For instance, S&P500 Futures dropped by more than 2% due to FUD from the Russia-Ukraine war.

Santiment noted that for its part, Bitcoin appears to be following alone. As time – and the war – goes on, this is likely to be a significant metric to watch.

Polar opposite views

That being said, it doesn’t mean traders are lying low and waiting for peace again. In fact, data revealed that the number of unique BTC being circulated hit a nine-month high.

Santiment also theorized that Bitcoin traders have been pursuing vastly different strategies during the war.


Sahana is a full-time journalist at AMBCrypto. She has a Masters in Journalism and her areas of study include crypto-regulation, digital society, privacy, and intersectionality. Ask her about film photography and philately.
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