Ethereum‘s quarterly correlation with Bitcoin has reached a 10-month high. The growing relationship between Bitcoin and Ethereum was spotted by the Unfolded team. In their analysis, the team shared the following chart that shows the increase in Ethereum’s correlation with Bitcoin over the past few weeks.
Why has the correlation between Bitcoin and Ethereum soared?
From the chart above, it can be seen that Ethereum’s correlation with Bitcoin started to rise in mid-May, right after ETH started to pull back from its all-time high of $4,372. This pullback was a result of Ethereum being in the overbought zone, as well as a 50% drop in Bitcoin.
Ethereum, on the other hand, fell 60% in 2 weeks, bottoming at $ 1,728. ETH is currently trading at $2,728. The cryptocurrency is also trying to break the critical resistance level of $2,800, which is close to the 50-day moving average on the chart. This price area is critical as it will determine whether Ethereum will return to the bullish zone above $3,000.
When we look at the daily ETH/BTC chart below, we can see that Ethereum is once again trying to get rid of the influence of Bitcoin, as in April and May. The daily MACD, RSI and MFI reveal that Ethereum is heading towards the 0.08 BTC resistance level in the following days.
Is ETH more advantageous against the dollar or against BTC?
If Ethereum continues to gain value against Bitcoin, the above-mentioned 0.08 BTC resistance area could be quite difficult for ETH to break as it is close to the 3-year high of 0.0824 BTC. In addition, the trading volume of the ETH/BTC pair has been on the decline since mid-May, indicating a slowdown in buying demand for Ethereum.
Therefore, caution is advised when trading with the ETH/BTC pair, as Bitcoin dominance may increase once again in the near future.
ETH/USD trading is cited as a safer route as Ethereum is more likely to exceed $3,000 than it is to appreciate against BTC.