Bitcoin and Ethereum could be risky to hold given the ongoing COVID-19 pandemic, the war between Russia and Ukraine, rising inflation rates and other global events. In fact, prices are swinging between red and green within days, if not hours, and investors are on high alert. However, data seems to suggest there is more nuance to it.
Pick up your baseball bats
Noting that crypto had entered the “big leagues” of finance, Messari acknowledged that investors could expect Bitcoin and Ether to correlate with the movements of risky stocks. However, that doesn’t seem to be the case when comparing BTC and Ether to the Russell 2000 growth index.
When the correlation of BTC and ETH with the growth of Russell 2000 was mapped, the correlation between late 2020 and early 2021 was above 80%. But the following year, the correlation dropped below zero.
However, in 2022, the BTC correlation was above 20% while the ETH correlation was above 0%. The mean correlation was approximately 35% and 30%, respectively.
4/ While $BTC † $ETH can be volatile, they don’t track as closely as most would assume for the riskiest market segments.
Using the Russell 2000 Growth Index as a benchmark for small-cap stocks with minimal gains $BTC on average about 35% correlation while $ETH on average about 30%. pic.twitter.com/E2vffBC4wG
— Messari (@MessariCrypto) February 27, 2022
Messari is not alone in concluding that Bitcoin and Ethereum have finally made it big. In fact, venture firm co-founder and author Chris Burniske claimed that BTC and ETH were the “developed markets” of crypto.
$BTC and $ETH are the developed markets of crypto, everything else is an emerging market.
— Chris Burniske (@cburniske) February 27, 2022
At the time of going to press, however, some recovery appeared to be underway. Bitcoin was trading near $40,000 on the charts, after rising 5% in the past week. Meanwhile, ETH changed hands for $2,808.
A real connection?
It may not be the time for investors to breathe a sigh of relief just yet, as Bitcoin’s correlation to stocks is still strong. For example, S&P500 futures fell more than 2% as a result of FUD from the Russia-Ukraine war.
Holiness noted that for its part, Bitcoin only seems to follow. As time — and war — progresses, this is probably an important metric to watch.
📊 Global equities start the week in the red again, with #SP500 futures down more than -2% as #war worries arise. #Bitcoin has remained closely associated with #shares, while traders wait for a breakout signal. Pay close attention to this relationship. 👀 https://t.co/06MTkomsnw pic.twitter.com/mVpiBp4Q0x
— Santiment (@santimentfeed) February 28, 2022
Opposite Pole Views
That said, it does not mean that traders sit still and wait for peace again. In fact, data showed that the number of unique BTC put into circulation reached a nine-month high.
Santiment also theorized that Bitcoin traders adopted vastly different strategies during the war.
According to Santiment, Bitcoin’s token circulation peaked at 9 months, demonstrating how polarized traders have become with the war. This circulation peak was comparable in March 2020. pic.twitter.com/7RfAc95vBr
— Wu Blockchain (@WuBlockchain) February 27, 2022
This post Keep an eye on this if you’re holding Bitcoin, Ethereum
was published first on https://ambcrypto.com/keep-an-eye-on-this-if-youre-holding-bitcoin-ethereum/