Ethereum Price Analysis: ETH Could Become Hedge Against Bitcoin

ethEthereum News Update

In 2017, investors treated Ethereum and Bitcoin as if they were identical. They painted both with the same brush, meaning that when Bitcoin did well, so did Ethereum.

But this relationship is starting to fray…

In an excellent post for Bloomberg View, Leonid Bershidsky shows that “It’s not just mindless speculation anymore” and that the correlations are starting to splinter. (Source: “Cryptocurrency Markets Aren’t All the Same,” Bloomberg View, January 21, 2018.)

He shows that ETH and BTC have had a negative correlation over the last 30 days. This means that when Bitcoin goes down, Ethereum goes up. And when Bitcoin goes up, Ethereum goes down.


This correlation is not perfect, of course. There isn’t a 1-to-1 relationship, but it’s interesting to note that Ethereum has become a de facto hedge against Bitcoin. This means investors are starting to see the difference between pure-currency-cryptos and decentralized-app-cryptos.

Ethereum Price Chart

eth price chart for 25 jan

Bershidsky shows this trend in more ways than one (just in case you’re skeptical).

He shows that direct spin-offs of Bitcoin—Litecoin and Bitcoin Cash—are inversely correlated to ETH prices. In the last 30 days, they moved in the opposite direction to Ethereum prices.

What cements his argument, in my opinion, is the sudden change in data. Three months ago, all cryptos moved together. Only from December onwards did things start to change.

We might attribute this newfound sophistication to the rise of Ripple (XRP), which is so emphatically different from Bitcoin. Or else we might accept that investors are finally educating themselves on the various subsets of cryptocurrencies.

In either case, I am happy to see differentiation in the market.

Analyst Take

Gaining its own identity is extremely good for Ethereum, particularly as governments close in around Bitcoin. I expect strong pushback against pure-currency-cryptos this year. It’s encouraging to see that investors might not abandon the market entirely once that occurs, but rather rotate their funds into more useful cryptos, such as Ethereum and XRP.

We maintain our $1,500 Ethereum price forecast.