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

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.

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.

At the time of going to press, however, some recovery appeared to be underway. Bitcoin was trading near $40,000 on the charts, after gaining 5% in the past week. Meanwhile, ETH changed hands on $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, the 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 — moves on, this is probably an important metric to watch.

Opposite Pole Views

That said, this 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.

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