Ethereum needs to reduce its correlation with Bitcoin before thinking about higher flights
Ethereum, along with many of the market’s altcoins, saw stellar results in 2021 from the point of view of trading prices. The currency was able to briefly surpass the coveted $ 2,000 price range a month ago, but was quick to redo, as ETH was unable to sustain that position.
While price increases have been frequent, they have also been evidence of how altcoins, including Ethereum, are correlated with Bitcoin’s price action. However, given ETH’s position as the world’s leading altcoin and the second largest cryptocurrency, is the currency ready to resume the $ 2,000 level once again?
Interestingly, for ETH, there are some signs of bullishness. In fact, previous precedents have shown that even the most optimistic chain data can falter and not mean much, thanks to its correlation with Bitcoin. The rise of Bitcoin has had a positive impact on currencies like ETH and, given the fact that the bull run is almost halfway there, where exactly does ETH leave in regards to its price aspirations?
Taking a look at the market data provided by CryptoQuant, we highlight how ETH exchange reserves have fallen since July 2020. This only increased as the bullish run took off, with exchange reserves dropping dramatically.
At the time of this writing, ETH in exchange portfolios had hit a 2-year low and highlighted how most traders have sufficient confidence in the asset’s long-term prospects. This discovery further strengthens the hodler’s feeling towards ETH, making it a little more immune to sudden sales.
In addition, Ethereum has also seen regular development on its platform. Although developer activity is not always responsible for price spikes, the fact that a healthy degree of development continues to occur in your network is always an encouraging sign for your investors and traders.
In fact, the data provided by Santiment highlighted this and also pointed out that ETH is not the only altcoin that has seen an increase in developer activity.
In addition, there was also an increase in ETH staking at ETH 2.0. At the time of writing, there were about 3.5 million ETH in staking and this, combined with the significant amount of ETH remaining in cold storage, is a solid case for a strong upward trend materializing for ETH . It can even be argued that this time, altcoin may have what it takes to see its trading price rise without Bitcoin’s help.
However, the high correlation with Bitcoin remains a limiting factor and, as expected, has continued to rise over the past three months. In fact, according to the CoinMetrics chart, the BTC-ETH correlation reached a 3-month high at the beginning of the month. While previous precedents illustrate how ETH has moved in sync with BTC on most occasions, traders have a reason to believe independent increases in the coming months thanks to ETH holders and their busy network.