{"id":305416,"date":"2021-07-22T14:27:41","date_gmt":"2021-07-22T11:27:41","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/decoupling-ahead-bitcoin-and-ethereum-may-finally-snap-their-36-month-correlation\/"},"modified":"2021-07-22T14:27:41","modified_gmt":"2021-07-22T11:27:41","slug":"decoupling-ahead-bitcoin-and-ethereum-may-finally-snap-their-36-month-correlation","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/decoupling-ahead-bitcoin-and-ethereum-may-finally-snap-their-36-month-correlation\/","title":{"rendered":"# Decoupling ahead? Bitcoin and Ethereum may finally snap their 36-month correlation"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3a1c60632a1\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3a1c60632a1\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/decoupling-ahead-bitcoin-and-ethereum-may-finally-snap-their-36-month-correlation\/#Correlation_risks\" >Correlation risks<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/decoupling-ahead-bitcoin-and-ethereum-may-finally-snap-their-36-month-correlation\/#Decoupling_ahead\" >Decoupling ahead?<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Decoupling ahead? Bitcoin and Ethereum may finally snap their 36-month correlation <\/strong>&#8221;<\/p>\n<div class=\"post-content\" data-v-128018ef>Anish Saxena, a New Delhi-based automobile dealer, made &#8220;incredible&#8221; profits by investing in cryptocurrencies in 2020, just as his business took a hit from the coronavirus pandemic-induced lockdown.<\/p>\n<p>&#8220;I had known about Bitcoin and Ethereum and dozens of other assets for years,&#8221; the 33-year old businessman said. &#8220;But I only got to invest in them after the lockdown pushed me and my family members out of work. And it helped us survive big time.&#8221;<\/p>\n<p>Anish revealed that he had allocated about 80% of his investment portfolio to Bitcoin (BTC) and Ether (ETH) with the rest of his capital distributed across Polygon, Dogecoin (DOGE), and Chainlink (LINK). His crypto-only investment netted him great profits, the numbers of which Anish declined to reveal.\u00a0<\/p>\n<p>However, he did notice that how he almost got half of its unrealized profits wiped by deciding not to liquidate ahead of the May 2021 crash.<\/p>\n<p>&#8220;I was liquidating cryptocurrencies based on my household demand for cash,&#8221; Anish said. &#8220;While I am still in profits, seeing my profits decline by more than 50% has prompted me to get a huge portion of my investments back into cash.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Correlation_risks\"><\/span>Correlation risks<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Retail traders like Anish have come under pressure due to over-reliance on two of the leading and popular cryptocurrencies: Bitcoin and Ether. <\/p>\n<p>While different in terms of economics and use cases, both digital assets tend to move in the same direction. In recent history, their losses and profits <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>eared well-synced, illustrating that their holders might see their investments grow rapidly during bull trends but, at the same time, risk losing a lot when the uptrend exhausts and reverses to the bearish side.<\/p>\n<p>&#8220;If it is a pure crypto portfolio, then, of course, having two cryptos which are highly correlated with one another adds risk to the portfolio,&#8221; said Simon Peters, a crypto analyst at multi-asset brokerage company eToro.<\/p>\n<blockquote><p>&#8220;While the portfolio could see exceptional performance one month with the two cryptos making gains in tandem, you could also see huge drawdowns in a bad month as the cryptos move lower together.&#8221;<\/p><\/blockquote>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-07\/d28e94fa-c402-446a-9723-5892ad746fe0.jpg\" alt=\"\" title=\"\"><figcaption style=\"text-align: center;\"><em>The realized correlation between Bitcoin and Ethereum seldom dropped below 50% in the previous three years. Source: Skew<\/em><\/figcaption><\/figure>\n<p>On the other hand, Liam Bussell, head of corporate communications at fiat-to-crypto gateway provider Banxa, called Bitcoin and Ethereum liquidity backstops for crypto traders. <\/p>\n<p>In his comments to Cointelegraph, the executive said that traders utilize their initial gains in the top two cryptocurrency markets to invest in mid and lower-cap digital assets, citing rallies in Dogecoin and across non-fungible token projects. He noted:<\/p>\n<blockquote><p>&#8220;Once the market begins to slow, traders try to move back to liquid assets like BTC and ETH. This can offset declines for a short time but can\u2019t maintain the market indefinitely.\u00a0There are gains to be made in bear markets, but it is volatile coins, and the risk is high.&#8221;<\/p><\/blockquote>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-07\/4f5e5db2-b597-4ffc-8d98-0e747562b980.png\" alt=\"\" title=\"\"><figcaption style=\"text-align: center;\"><em>Bitcoin and Ethereum trends throughout the history. Source: TradingView.com<\/em><\/figcaption><\/figure>\n<p>Additionally, Peters advised traders and investors to counterbalance their crypto investments risks by allocating a good portion of their capital in traditional financial instruments, including stocks, commodities, and fixed-income securities\/funds.<\/p>\n<p>&#8220;Historically crypto has shown itself to be pretty uncorrelated to other asset classes and offers better risk-adjusted returns,&#8221; the analyst explained.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Decoupling_ahead\"><\/span>Decoupling ahead?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Peters meanwhile reminded that the Ethereum network&#8217;s transition from proof-of-work to proof-of-stake\u2014known as Ethereum 2.0\u2014might limit its correlation with Bitcoin.<\/p>\n<p>In detail, one of the principal features included in the upcoming Ethereum blockchain upgrade is deflation. Dubbed as EIP-1559, the Ethereum improvement proposal intends to burn a portion of transaction fees collected from users. <\/p>\n<p>That could wipe out at least a million ETH tokens every year out of circulating supply, thus making the asset scarcer, <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/medium.com\/coinmonks\/ether-is-becoming-a-deflationary-cryptocurrency-2d34ab62ff50\">according to crypto education publication Coinmonks<\/a>.\u00a0<\/p>\n<p>Bitcoin exhibits a similar scarcity by reducing its newly issued supply rate by half every four years, a process called halving. The cryptocurrency has a limited supply cap of 21 million tokens.<\/p>\n<p><strong><em>Related:\u00a0London fork enters testnet on Ethereum as difficulty bomb sees delay<\/em><\/strong><\/p>\n<p>&#8220;It&#8217;s possible that a decoupling could occur between bitcoin and ether following the completion of the transition to 2.0 as the &#8216;tokenomics&#8217; \u2014 how ETH works on the 2.0 blockchain will be different to at present,&#8221; said Peters, adding that:<\/p>\n<blockquote><p>&#8220;Demand for ETH could vary depending on staking reward yields at that time, which in turn could drive the price of ETH higher or lower independently from other cryptos.&#8221;<\/p><\/blockquote>\n<p>As for Anish, the novice trader said he would &#8220;HODL&#8221; on to a portion of his BTC and ETH.<\/p>\n<p>&#8220;If business picks up again after a full economy reopening, I&#8217;m planning to invest consistently across Bitcoin, Ethereum, gold, and mutual funds,&#8221; he noted.<\/p>\n<p class=\"post-content__disclaimer\">The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.\n<\/p>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/decoupling-ahead-bitcoin-and-ethereum-may-finally-snap-their-36-month-correlation\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Decoupling ahead? Bitcoin and Ethereum may finally snap their 36-month correlation &#8221; Anish Saxena, a New Delhi-based automobile dealer, made &#8220;incredible&#8221; profits by investing in cryptocurrencies in 2020, just as his business took a hit from the coronavirus pandemic-induced lockdown. &#8220;I had known about Bitcoin and Ethereum and dozens of other assets for years,&#8221;&#8230;<\/p>\n","protected":false},"author":1,"featured_media":305417,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDcvMzQ0NDZmYTEtYWIyMC00ZDhjLWE1YmUtMGE2NzJkNGI3ZWNjLmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74862,74937,74982,75583,110761,76153,82402,74891,75326,112518,74938,74939,75150,73785,70359],"class_list":["post-305416","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-bitcoin","tag-bitcoin-price","tag-btc-markets","tag-cash","tag-commodities-investment","tag-dollar","tag-ether-price","tag-ethereum","tag-ethereum-2-0","tag-ethereum-novice","tag-ethereum-price","tag-market-analysis","tag-market-update","tag-markets","tag-stocks"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/305416","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=305416"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/305416\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/305417"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=305416"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=305416"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=305416"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}