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Is Ethereum’s Price Action Dependent on Bitcoin?

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The Underlying Correlation Between Bitcoin and Ethereum

The correlation coefficient is the statistical measure of strength that two relative variables have in their relationship. Analysts observed a sync performance between Ethereum and Bitcoin since last year. Both coins have a strong positive relationship. Where their price correlation coefficient is 0.68.

This estimate represents the past 100 days of price action for both assets. The correlation measurement usually has 1 as the strongest positive correlation. -1 represents the strongest negative correlation.

A negative coefficient reveals two prices moving in opposite trends. The positive coefficient, however, shows price actions moving in the same direction.

In this regard, the price of Ethereum has most times depending on the valuation of Bitcoin. Here is why? 

Oftentimes factors such as expert forecasts, calamities and major political events have influenced cryptocurrency market sentiment.

Closely, it turns out that overall cryptocurrency market sentiment has a huge influence on Bitcoin. Therefore it is likely that the price of a couple altcoins could depend on the price action of Bitcoin.

According to Skew, Ethereum posted the highest correlation coefficient with Bitcoin for two consecutive years. The total average correlation is 0.9. While 2019 posted the highest correlation index between both digital assets. 

2018 bear market will go down the books of history given the historic bitcoin price crash. A squashing crypto market bloodbath followed the massive price shed. This indicated a striking correlation between the price of Bitcoin and that of all crypto assets.

The stock market has witnessed a high correlation between the United States Dollar and equity markets. As the US dollar is the largest store of wealth, so is Bitcoin the largest store of asset class wealth. It, therefore, makes sense that the overall performance of crypto markets is pegged on Bitcoin. 

However, most traders and analysts agree the Ethereum – Bitcoin correlation is a natural situation in the cryptocurrency market. Meanwhile, Michael Van de Poppe compared the correlation coefficient in crypto markets to that of commodities. The Amsterdam Stock Exchange trader and market analysts said gold leads in the commodities asset class. Gold’s price sets the pace for other metals. 

It is therefore clear that Bitcoin’s price could change as a result of government policies, high volatility in traditional financial markets; but this change will likely reflect on the entire cryptocurrency market. However, Van de Poppe notes slight variations in this observation. He says: 

“Some parts the correlation is high in which Ethereum outperforms Bitcoin, in some parts, it’s low as Ethereum drops hard against Bitcoin, while Bitcoin trends up against USD. It’s different in different parts.”

Ethereum will not necessarily repeat Bitcoin price movements. A correlation study for the period between June 2017 and December 2019 revealed that 5 of 14 cases indicated a strong positive correlation. While four cases showed a negative correlation coefficient.

However, the correlation between Ethereum and Bitcoin has intensified since the last half of 2019. Nonetheless, researchers at the San Francisco Open Exchange reveal Ethereum’s strong correlation is a result of general failure.

Particularly the failure to launch Ethereum 2.0 in 2019. Several studies have also been trying to establish a correlation pattern between cryptocurrency and equity markets. Sadly, none was identified and traders have been quick to suggest that correlation is not a reliable tool for market analysis. 

 

Bitcoin’s Price Action Before The 2020 Halving

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These initial days of 2020’s Q1 represent a winning streak for Bitcoin. Up from the horror of an annual 2019 low of $6,000, the coin is experiencing worthwhile surges. At a glance, Bitcoin’s turn of events in 2019 was easily predictable throughout the year. 

However, the largest coin’s price action by the end of last year caught the entire market pants down. While data from Skew indicated a 6% probability of Bitcoin attaining its all-time high; a close surge crashed after attaining $14,000. This shattered the likelihood of the coin reaching $20,000. 

Nevertheless, the market is anticipating a nice return above the $10, 000 support. The Bitcoin halving could serve a rather significant upward pull in the coming 100 days. Let’s see what to expect. 

Meanwhile, the past 14 days have seen Bitcoin record a 20 percent gain. Seemingly approaching the $10,000 price mark gradually during press time.

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A twitter crypto analyst @Lightcrypto is expecting Bitcoin to break the $10,000. He shared his positive anticipation on his Twitter profile: 

In my mind, the odds of breaking $10,000 in the next two days is over 80%.”

Light noted that Bitcoin is ready for its pre-halving upswing. In fact, he said, “Bitcoin is already past its psychological litmus test.” The crypto trader and analyst pointed out it was quite impossible for traders to have held onto their positions this long.

Only to end up dumping their coins before a surge. His bullish prediction had that Bitcoin would surge to $11,000, shortly after the coin attained $10,000. 

“If and when we break the $10,000, we teleport to probably $11,000 in an hour.”

Flib Flib, a recognized cryptocurrency analyst and researcher made a chart estimation of Bitcoin experiencing a vertical surge towards the $9,000. Bottom at $6,000 by December and recover to $9,000 by January this year. He is famous for making an accurate forecast of $3,000 during the 2018 bear market.

Flib Flib wrote in a Decentrader newsletter that he believes  Bitcoin is going to surge to $15,800 before the halving event. He backed the forecast by taking note of the previous halving, Bitcoin found a temporary top at $800, the 78.6% Fibonacci Retracement level of the upward correction prior to the even

Flib mentioned that his volume indicators were well positioned and the moving averages were trending pretty well. The approximately $16,000 goal depends on historical trends. In addition to a confluence of several technical analysis indicating further upsides in the short term. Flib Flib also stated that his major indicators include the one month, four-hour and one-day candles. He suggested in the post the price of Bitcoin was meant for higher gains in the next few weeks. 

 

Top 10 Decentralized Exchanges for Trading Crypto in 2020

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Decentralized exchanges came to birth following increased cybercriminal attacks towards centralized exchanges. This was especially sparked by the unsolved hack of QuadrigaCX that saw at least $140 million of crypto assets. Improper data practices have created bloodshed of centralized exchange users, despite having in place proper regulation and customer service. 

The entry of decentralized exchanges into the scene has not been without challenge. High technical barriers, liquidity shortcomings, limited withdrawal processing, and technical oriented user experience are some of the challenges plaguing DEX. Although it’s really difficult to sort out the best-decentralized exchange, outlining how a good DEX looks like could be a thing. 

The metrics under consideration while weighing what a good decentralized exchange includes: 

  • Know Your Customer (KYC) standards
  • Trading fees
  • Diversity of supported tokens
  • Liquidity  
  • User experience

For any exchange, the most significant factor is its liquidity. Liquidity is the ease with which to buy or sell a given asset. In this case, it determines the ease with which a digital asset is converted into liquid cash. Cryptomarket liquidity is essential to estimating when to make a cash-out. High liquidity is good because it is a higher trading possibility. On the other hand low, liquidity causes price slippage. This occurs when there is a delay between order initiation and execution of a trade.  A situation that will occasionally create a price variation. Hence most traders dealing with high volume transactions might prefer centralized exchanges. 

Decentralized trading platforms are expanding their scope, and 2020 may well be the year. Perhaps they will offer even greater security and cutting edge user experience. Maybe they will offer user experience of even greater security and cutting edge. Off-grid openness and it is obvious that consumers depend on customer funds, peer-to-peer transactions and automated processes; bow their loyalty to DEXs.

Top 10 DEXs to Exchange Crypto 

1.0x Protocol and Relayers

Protocols are not completely exchanges but frameworks upon which developers can deploy ERC tokens over the Ethereum blockchain. I listed it here because it’s the leading platform for exchanging ERC tokens in a decentralized, efficient and cost-effective manner. The tokens are usually from DApp projects. Especially in the gaming and content creation ecosystem. 

2.Airswap Protocol

There are no big differences between Airswap Protocol and 0x. The platform does not require any identification information and doesn’t charge trading fees. Airswap protocol is deployed on the Ethereum blockchain relies heavily on the speed of on-chain activity for security. Traders usually execute a trade after negotiating a suitable price. Where both parties will not agree towards a common price, both parties query the oracle. 

So what’s Oracle? 

Airswap describes in its whitepaper that the Oracle provides pricing information to enable the maker and the take make a more informed choice, and smoothen trading negotiation. 

3. Changehero

ChangeHero DEX allows traders to conduct cryptocurrency transactions by complying with all regulatory authorities. The exchange complies with Know Your Customer [KYC] and Anti Money Laundering [AML] policies to create a safer financial ecosystem. This allows users to maintain privacy as well as use their cryptocurrencies in peace.

4.IDEX

IDEX remains the most popular Decentralized Exchange. Fund management takes place via an Ethereum smart contract. Traders access the smart contract through a private key. Meanwhile, there are four ways to access the wallet. Through a MetaMask, Ledger Nano S, manual entry of the private key or a Keystore file. In comparison to other DEXs, IDEX has better liquidity. 

5.Kyber Network

Kyber network operates a stack of smart contracts developers can leverage on any blockchain. The platform also offers a native token known as the Kyber Network Crystal. Kyber allows takers to trade their tokens through a network of actors. These takers could either another decentralized exchange, wallet addresses, decentralized organization or decentralized application. Meanwhile, holders of the KNC token benefit from governance rights and participation in treasury funds. 

6.Bisq

Bisq is a prominent DEX for exchanging bitcoin. Traders can exchange bitcoin for national currencies. Additionally, Bisq does not require identification details. The platform is open source and developers from across the world contribute to its development. Bisq implements Tor routing and local computing to make sure the platform is decentralized. 

7.Binance DEX

The better part of this list includes exchange platforms deployed on the ethereum blockchain. Binance noted this and launched their own native blockchain. It is upon this blockchain that the leading exchange platform would launch a DEX movement. The Binance DEX works on top of Binance Chain and has low latency, low fees, intuitive user experience and high throughput. Binance DEX superfast speeds enable it to confirm transactions within seconds. 

8.Bancor

Bancor exchange offers an exchange model with no second party. Traders usually exchange their ERC-20 tokens for the network’s native token – Bancor Network Token. Meanwhile, holders of BNT exchange these for other ERC-20 tokens. Note that the traders can store any type of ERC-20 tokens on the Bancor protocol through a smart contract. Bancor is attempting to improve liquidity for small-cap tokens, which might not find adequate markets on other exchanges.

9.Stellar DEX

The Stellar network deployed its own decentralized exchange to push the adoption of its blockchain project. Traders get started on the Stellar DEX by creating a key pair consisting of a public key and a secret key. Public keys are for identifying an account, while a secret key accesses the account to make transactions. 

10.BarterDex

BarterDEX implements atomic swaps – which makes it one of the most advanced DEXs. The user interface isn’t that great. Well, the platform is available on Windows and Mac.