Ethereum’s correlation to Bitcoin had dropped to as low as 0.42 in late November
Such levels were last seen in 2018
Ethereum’s correlation to Bitcoin has since increased to 0.75
This is an increment of 178% in two weeks
Ethereum’s price is once again in bearish territory
However, a bounce is likely with the bullish global events of a possible Brexit deal and a US Stimulus
Ethereum’s 30-day correlation to Bitcoin has experienced a significant upward spike in the last two weeks. According to data from Coinmetrics, Ethereum’s 30-day correlation to Bitcoin is currently at 0.749 after hitting a two-year low of 0.42 on the 24th of November. Below is the Ethereum/Bitcoin correlation chart courtesy of Coinmetrics, further demonstrating this fact.
ETH2.0 Had Caused a Drop in Ethereum’s Correlation to Bitcoin
From the chart, it can be observed that Ethereum’s correlation to Bitcoin was at 0.95 levels in mid-October. However, the correlation experienced a significant drop as the launch of Phase 0 of ETH2.0 gathered momentum and hype. The Beacon Chain of ETH2.0 was launched on the 1st of December.
From the chart, it can be observed that the correlation between Ethereum and Bitcoin started to climb around the same time. The current level of 0.75 is roughly a 178% increment from its 0.42 low experienced in late November.
Ethereum is Once Again in Bear Territory
In terms of price action, Ethereum is once again in bear territory after Bitcoin dipped from $19,300 levels to $17,800 in a span of 24 hours. Given that Ethereum is highly correlated to Bitcoin, ETH also dropped from $595 levels to $530 in the same time period.
At the time of writing, Ethereum is trading at $563 amidst what looks like a short-term bounce that could see ETH retest $575 or even $580.
From a technical analysis point of view, the daily ETH/USDT chart reveals the following.
The daily MACD, RSI and MFI all confirm a bearish environment for Ethereum
The 50-day moving average provides an area of support around the $500 – $490 support area
Other macro support zones lie at $470, $440, $420 and $400
Short Term Bounce for ETH is Possible
However, Ethereum’s bearishness might be abated by news of the UK’s Prime Minister, Boris Johnson, heading to Brussels to iron out the final details of Brexit. Furthermore, there are murmurs of a possible stimulus bill in the US before Joe Biden is inaugurated in January. Therefore, the excitement in the traditional stock markets brought about by the possibility of these two events, might spill over to Bitcoin and Ethereum.