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Ethereum Finishes 2022 With ATH Correlation To Bitcoin, Despite The Merge

Data shows Ethereum’s year of high correlation with Bitcoin is coming to an end with the metric hitting ATH values.

Ethereum Ends 2022 With All-Time High Correlation To Bitcoin

According to the year-end report from Arcane Research, the global markets have all fallen strongly correlated this year. The “30-day correlations” is an indicator that measures how in-tune Bitcoin has been with another asset in terms of price movement over a 30-day period.

When the value of this metric is greater than zero, it means there has been a positive correlation between BTC and the other asset in the past month. On the other hand, negative values imply that the price of the crypto has been reacting to changes in the value of the other asset by moving in the opposite direction.

Also, the higher the metric value (in either direction), the more the degree of the correlation. Naturally, the metric has a value equal to zero suggesting the two prices aren’t tied to each other at the moment.

Now, here is a chart that shows the trend in Bitcoin’s 30-day correlations with Ethereum, S&P 500, and Nasdaq over the past year:

Bitcoin And Ethereum Correlation

As the above graph displays, Bitcoin positively correlated with these three assets during 2022. BTC’s correlation has been around or above 0.5 for most of the year for the US equities, suggesting it has been decently tied with them.

The correlation with Ethereum, however, has been at values of around 0.9 or more, implying Bitcoin has been extremely correlated with it. Even now, as the year’s end, the correlation between these cryptos stands at 0.97, around ATH levels.

Back in September of this year, ETH successfully finished its much-anticipated transition to a Proof-of-Stake consensus system, an event known as the Merge. Since the Merge brought some developments unique to Ethereum, the correlation with BTC dropped, as is apparent in the chart.

However, it wasn’t long before the two started moving on the same wavelength again, so even the Merge wasn’t enough to cause sufficient impact to separate the coins.

Also, since Bitcoin is highly correlated with stocks, so is Ethereum. Though, Arcane Research expects that this correlation between the cryptos and the US equities will soften in the next year due to trading volumes in the crypto market declining substantially.

ETH Price

At the time of writing, Ethereum’s price floats around $1,200, down 2% in the last week.

Ethereum Price Chart

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These Key Factors Might Push Ethereum To Outplay Bitcoin

Bitcoin, Ethereum, and the entire crypto market is often prone to price fluctuations. That’s why crypto investors must carefully monitor the market movement to avoid huge losses when prices are low. The crypto bear market could also be a time for long-term investors to leverage low prices and purchase assets which they can sell during bull runs.

However, the past months’ losses have been nearly unbearable for investors as factors such as interest rate hikes and inflations escalated the issues. Nevertheless, the crypto market has recorded some relief in the past week as some assets saw massive price rallies.

Among the assets that performed well is Ethereum, having seen over 9% gains in the past seven days. Ethereum’s performance brought the total crypto market capitalization back to the $1 trillion mark.

Three Factors Driving Ethereum Performance

The rally started on October 25, with Ether gaining 17%, while BTC only managed to add 6% over the same time. Some analytics explained why Ethereum had such an outstanding performance over Bitcoin.

Grayscale, an institutional assets manager, said Ethereum’s supply level after the merge might have influenced the asset’s performance. ETH supply was so much before the merge. But ETH issuance dropped after the merge to approximately 14,000 ETH per day and less than 5 million per year.

Moreover, like BTC miners, Ethereum miners had to sell assets to cover expenses during the long crypto winter. However, the situation has improved after the proof-of-stake transition, minimizing the selling pressure. Grayscale November report revealed that the reduced selling pressure exposed the ETH price to more positive upward movements.

Ultrasound Money reported that Ethereum supply growth is now only 0.09% per year. ETH supply switched to deflationary growth many times in the past weeks. It happened when the network ETH demand increased, leading to the burning of more tokens than produced. Theoretically, ETH’s attractiveness as a long-term asset has increased.

Energy Consumption Rate And Ether Price Outlook VS. Bitcoin

Moreso, Ethereum energy consumption was reduced by 99.9% post-merge, making the asset more environmentally friendly. That has made ETH more appealing to environmental, Social, and governance-conscious institutions.

Digiconomist Ethereum Energy Consumption Index revealed that the energy consumption reduced from 84 TW/h per year to 0.01 TW/h after the merge. The listed factors made Ethereum a better prospect for investors than Bitcoin, reflecting on its recent performance.

Ethereum is currently trading at $1,552. Its price jumped to $1,645 on October 29, the highest since the middle of September. But it did not move higher, and it’s still 67.6% down from its November 2021 all-time high.

These Key Factors Might Push Ethereum To Outplay Bitcoin

Ethereum price soars above $1,500 on the chart l ETHUSDT on Tradibgview.com

ETH gained 24% in the past month but still range-bound like it’s been since May. This number is somewhat better than Bitcoin’s price decline.

Bitcoin dropped more than 70% from its November 2021 all-time high. Currently, Bitcoin is trading at $20,300. Its market dominance is now 38.77%, and a total capitalization of $393 billion.

Featured image from Pixabay and chart from TradingView.com

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Ethereum Registers Massive Inflows Even Though It shows Subtlety

The second largest cryptocurrency is making a new wave in space in inflows, Ethereum and its related products recorded massive inflows for a second week consecutively. CoinShares’ weekly fund flow report data indicated a total inflow of $5.6 million for Ethereum and its related products.

Data for the overall investment products of digital assets was about $10.3 million in inflows last week. In addition, the report noted that this is the third consecutive week of inflows for virtual assets. However, investors are still hesitant about the low flows.

Also, last week’s trading volumes of investment products amounted to $886 million. This is the lowest value recorded since October 2020.

For Bitcoin, it was a case of recording its third week of minor inflows of about $7.7 million. In addition, the primary crypto asset had its short recording inflow of approximately $2.1 million last week.

Other Altcoins Recorded Outflows For Last Week

The altcoins, with the exemption of Ethereum, had negative trends with outflows for last week. They recorded a total flow of about $3.5 million. Most assets with higher outflows include Cardano, Avalanche, and Polygon. Their outflows were $0.5 million, $0.8 million, and $0.9 million, respectively.

Last week, XRP and Cardano products recorded their first outflows of $300,000 and $500,000 since August. The values are on the high side in comparison with their previous inflows. Both tokens had recently encountered a drastic drop in their values, creating more fear in the minds of investors and traders.

Some areas recorded minor outflows during the last week. Except for Sweden, which had an inflow of $16 million, most European nations saw outflows. Also, Germany saw outflows amounting to about $9.1 million. But the US noted a cumulative inflow of about $7.7 million.

The statistical data for the month-to-month outflows for digital assets investment products is about $42.6 million. The year-to-year inflows are cumulatively at $448 million.

Ethereum Merge And Ethereum Outflows

There were some outflows from ETH-related products from the period preceding the Ethereum Merge on September 15. This is due to the division in sentiment concerning the Merge. While some believed that the transition to PoS would bring a price hike for Ethereum and its derivatives, some had a contrary opinion.

Hence, some investors hastened to sell off their holdings before the Merge creating increased outflows for the network during the period. But some decided to stick with the transition keeping their holdings intact. They opted to stake their Ether.

Ethereum follows an uptrend on the chart l ETHUSDT on Tradingview.com

Following the completion of the Merge event, the demand for Ethereum-related products is gradually rising. This resulted in the inflows for the products within the past two weeks.

Featured image from Pixabay, Chart: TradingView.com

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Investors Withdraw ETH Holdings Despite Successful Ethereum Merge

Before the Ethereum merge event, some experts and investors predicted a fall in the price of Ethereum and hence traded cautiously. Popular analysts referred to the merge hype as a buy the rumor, sell the news scenario.

The Feds reserves tightening and other market factors added to the volatility recorded in the valuations of ETH, BTC, and other Altcoins.

After the merge event, analysts’ predictions proved right as the ETH price crashed below the support level. As a result, several ETH investments got withdrawn, and a few additions were recorded after the merge.

According to reports, ETH investments were reduced by $15.4 million, while BTC investments increased by $17.4 million. The data could imply that investors pulled out from Ethereum to Bitcoin.

Contrary to the hype that followed the Ethereum merge, the ETH price has plummeted seriously. Earlier in September, the merge supporters believed that Ethereum would receive more investments after the merge. However, the reverse seems to be the case with the number of outflows recorded last week despite a smooth transition.

Ethereum Price Drop

Taking track of ETH price from the time before the merge till today, ETH price crashed from $1,800 to $1,300. This kind of record can only imply that several investors who previously held onto their ETH holdings have sold the same. Such a price drop is critical for Ethereum as experts have forecasted a further fall to $1,000 if ETH breaks below $1,250.

ETH drops below $1,400 l ETHUSDT on Tradingview.com

In the early hours of September 15, ETH/BTC exchange price was at 0.0817BTC on Binance. ETH value dropped hours later to 0.0746 BTC and continued to decline. ETH price didn’t only fall against BTC; ETH/USD exchange value dropped too. Although ETH holders were not pleased with the price drop, the majority are looking forward to recovery with time.

Among the optimistic investors is Matthew Sigel, head of digital assets research at VanEck. Sigel compared the post-merge ETH/USD performance to what BTC experienced after significant changes. He believes ETH would stabilize but is unsure about the time.

Proof-Of-Stake Cryptocurrencies May Be Considered Securities, Says SEC

Last week, the Chairman of the Securities and Exchange Commission, Gary Gensler, commented on staked cryptocurrencies. The regulator said in a Wall Street Journal edition that staked cryptocurrencies might be subject to regulations. He further explained that Staked crypto might be seen as securities.

Following Gensler’s comment, there may be regulatory uncertainties surrounding the new Ethereum proof-of-stake Token. As a result, corporate investors may not want to dive into ETH investment because of regulatory uncertainty.

According to the Journal, Ethereum’s proof-of-stake caught SEC’s attention. He further noted that proof-of-stake coins have contract attributes and will require SEC regulations. Gensler’s comments came out hours after the completion of the Ethereum merge.

Although Gary didn’t categorically point at Ethereum, his comment might have contributed to the fall in Ether price last week.

Featured image from Pixabay, Chart: TradingView.com

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Quant Explains How Whales Moved Before And After Ethereum Merge

A quant has explained how the movement of whales differed between before and after the Ethereum merge went live.

Ethereum Funding Rates Reached An All-Time Low Just Before The Merge

As pointed out by an analyst in a CryptoQuant post, a lot of ETH investors bet on the price going down around the merge’s completion.

The relevant indicator here is the “funding rate,” which measures the periodic fee that perpetual futures contract traders exchange between each other.

When the value of this metric is positive, it means long investors are paying a premium to the short holders right now to hold onto their positions. Such a trend shows a bullish sentiment is more dominant in the market currently.

On the other hand, negative values of the indicator suggest shorts are overwhelming the longs at the moment as the majority are feeling bearish.

Now, here is a chart that shows the trend in the Ethereum funding rates over the last few days:

Looks like the metric had a deep red value not too long ago | Source: CryptoQuant

As you can see in the above graph, the Ethereum funding rates had been going down only a couple of days back, and reached a new negative peak right as the merge arrived.

The quant explains that this was because investors thought the PoS transition hype had already impacted the market, and so they bet on short positions, believing that the price would go down during the aftermath of the much anticipated event.

But just following the merge, the price actually rather saw a slight improvement. Seeing that the decline they had waited for didn’t come, these short holders quickly started closing up their positions, leading to the funding rates sharply moving up.

Right as this happened, the whales who had been waiting jumped in and dumped their ETH, causing the price to plunge down hard. The analyst notes that this is a display of whales trying to make a move in such a way that nets them the largest gains. “To read those moves, we need to utilize both on-chain data and charts,” says the quant.

ETH Price

At the time of writing, Ethereum’s price floats around $1.4k, down 7% in the last seven days. Over the past month, the crypto has lost 24% in value.

The below chart shows the trend in the price of the coin over the last five days.

The value of the crypto seems to have been going down during the last few days | Source: ETHUSD on TradingView

Ethereum has been trending down since the merge took place, and right now it’s unclear when the crypto may show some reversal.

Featured image from Thomas Lipke on Unsplash.com, charts from TradingView.com, CryptoQuant.com

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Ethereum Price Stalls While Bitcoin Dips Below $20,000 Post Merge

Finally, the Ethereum Merge long-awaited Merge has occurred. As the most hyped historic event in the crypto space, many people projected different sentiments about the upgrade. Parts of the pre-merge reactions were negative.

With the official conclusion of the Paris upgrade, popularly known as the Merge, the Ethereum network transited from PoW to PoS. This marked the consolidation of the two separate layers, the execution layer (PoW chain) and consensus layer (Beacon Chain).

No Immediate Volatility With The Ethereum Merge

While many people in the crypto industry had expected the Ethereum transition to create volatility, the outcome is different. The upgrade has not distorted the price of the Ethereum coin. All the Ether community was hoping that ETH merge would bolster Ethereum growth; rather, it has fallen below.

It’s pretty unclear if Ethereum could sustain its value in the post-merge period as the price of ETH gradually drops. At the time of press, Ether is trading at $1,428, depicting about a 3% decrease within the past 24 hours.

The performance of Ethereum Classic after a few hours of Merge also tanked. ETC went north and even reached the $40 mark. But the token has started dropping through the trading hours today. At the press time, ETC is hovering around $33.19, dipping by 9.39% over the past 24 hours.

Other altcoins were seen to be gradually reclaiming their values. Some of the larger-cap altcoins in the green include ADA, XRP, MATIC, TRX, and DOGE.

Some large-cap altcoins like DOT and BNB were already in the red with a slight drop. However, BNB is also trending sideways.

Bitcoin Dropped Below $20,000

While Ethereum stalls on its value after the Merge, the case is different for Bitcoin. The price of BTC is battling and has gradually plummeted below the $20k region again.

After claiming $22,800 over the past few days, the primary cryptocurrency was progressively gaining market dominance. As a result, its recovery became better than most of the altcoins. But the sustainability quickly retracted with the release of the US CPI data for August recently.

Within hours following the announcement, BTC’s price dropped by over $2,000. Unfortunately, the return to the $20,000 has remained a struggle for Bitcoin.

Bitcoin battles the $20,000 mark l BTCUSDT on Tradingview.com

Gradually BTC dropped to $19,600, depicting a 5-day low for the token. This triggered several liquidations worth $200 million in the market. At the time of writing, Bitcoin is trading at $19,620, showing a drop of0.63% over the past few hours.

Featured image from Pixabay, chart from TradingView.com

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Ethereum Funding Rates Hit The Low Amid The Shift From PoW

The Ethereum upgrade has shifted the network from Proof-of-Work (PoW) to Proof-of-Stake (PoS). The Ethereum mainnet and the Beacon Chain will finally merge as a single blockchain through the transition.

According to the estimations of EtherNodes, the Ethereum transition will occur if there are no underlying technical challenges. Before now, the team of developers confirmed the checklist for the Merge before releasing it.

There have been several sentiments and reactions concerning the Merge lately. This significantly impacted ETH and all its derivatives in the crypto market. Some participants are accumulating more expecting a sudden spike in price. But some are even disposing of what they have due to fear of volatility.

Sentiments On Merge Affects ETH Funding Rates

Currently, expectations and more attention are glued to the Ethereum blockchain. But based on the state of the miners, there could be variation in the transition estimated time. From the look of things, the ETH futures traders seem to be calculating their moves.

The data from CryptoQuant revealed that Ethereum funding rates had hit a new all-time low. This recent point marks the lowest for the Ether derivatives.

ETH funding rate is a metric that provides forced convergence of prices between the contract and the underlying asset. It indicates the payment that comes from long to short or short to long traders. The difference between an asset’s spot and the perpetual futures contract prices provides the funding rate.

Negative Value For Ethereum Funding Rates And Implication

CryptoQuant data give a negative value for the Ethereum funding rates. This means that the dominant force in the order book goes to short traders. Hence, will be paying long traders accordingly.

Futures traders place high importance on funding rates. This is because these rates are like spontaneous catalysts that could alter their trading stance positively or negatively. As a result, they will make huge profits or suffer massive losses.

Usually, traders that pay high funding while using high leverage will likely have losses. However, such a flip is possible to occur even when the market is not under a severe bearish influence. So, they may resort to hedging as protection.

Ethereum expected to surge l Source: ETHUSDT on TradingView.com

The negative value of the ETH funding rates implies that futures traders are currently hedging their spot exposure. A considerable explanation for such results points to the Merge. Hence, the traders could exercise more caution due to potential volatility that could erupt after the transition.

Featured image from CNN, chart from TradingView.com

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Experts Predict Ethereum Will Plunge Further In Price

The Ethereum merge is among the most significant events since its blockchain and the industry emerged. The event will move the blockchain from Proof-of-work (POW) to proof-of-stake (POS). While everyone is waiting for the positive impacts of Merge.

The effect of the transition is already resounding in the crypto market. The market saw a major decrease in Ethereum prices in the last 48 hours. Moreover, Crypto market analysis experts fear that there may be a further drop in Ethereum price after the merge.

While everyone expects good results, there is yet a possibility that a hard fork may occur. If this happens, it will affect crypto prices negatively.

Merge Hype May Be A Buy Rumour, Sell News Scenario

Ether has already performed better than BTC in the past weeks, courtesy of the merge hype. However, some experts fear the merge hype might have a ‘buy the rumor and sell the news outcome.

The buy the rumor and sell the news event happens in the capital markets. It is when high expectations of Merge events or economic reports cause a hike in asset prices. The hiked prices fall again after the event passes.

Popular Cryptocurrency trader and influencer Lark Davis expressed his thought about the hype. In his tweet, he said the merge is a fundamentally bullish event. Davis outlined the features expected of the coming Ethereum POS. However, he also stated that they wouldn’t bring a significant impact immediately.

Following Davis’ analysis, the impact of an increase in energy efficiency, emissions, and all the features will only reflect in the long run. Therefore, he thinks the Ethereum merge has the ‘sell the news effect.

Another major crypto influencer, Quinten Francios, commented on the merge hype. According to Francios, the post-merge Ethereum price will drop as opposed to the Bitcoin price.

Therefore, it implies that Bitcoin price will rise while Ethereum price will fall post-merge. He added that the Ethereum price would recover strongly after some time.

Ethereum price plunges amid Merge l Source: ETHUSDT on Tradingview.com
Ethereum Merge Won’t Solve Other Fundamental Problems

Experts have explained the reason Ethereum merge results will not take effect quickly. The transition will change the consensus mechanism of the blockchain to POS but won’t solve some other fundamental problems. For example, it won’t address the issue of low gas fees or expand the network’s capacity.

It won’t also improve the transaction speed. A smoothly executed upgrade won’t address the problem of high transaction fees.

The CEO of Aloe, Haward Wu, expressed his concerns on LinkedIn regarding the high gas fees in Layer-2s. He said they would only be scalable if enabled by Ethereum’s throughput.

But Buterin’s Four-phased theory may address these issues. His data sharding, execution, and scaling solutions solve all the problems.

Featured image from Pexels, chart from TradingView.com