The top two cryptocurrencies are closing the week at a low and the correlation between Bitoin and Ethereum moderated slightly. Data shows that the 30-day correlation co-efficient between the two assets declined to 0.77. This was the lowest level since June 12. Bitcoin’s price dropped by 6.87% in the last seven days and Ether dropped 16.50%.
Some traders believe the weakening relationship between Bitcoin and Ethereum can signal a fundamental change. As such, they are re-evaluating their investment strategy. Others see it as a short-term dislocation in price that can be exploited upon expectations that the correlation will again strengthen.
But Bitcoin and Ethereum correlation cannot be ruled away just yet. The pair could nevertheless deliver some large gains in the years to come. ETH/BTC pair on the weekly log chart is painting a potential cup-and-handle since January 2018. A rally toward 0.5 BTC is on the cards for 2023. Analysts describe cup-and-handles as bullish reversal patterns with their upside targets located at levels equal to their maximum height when measured from their breakout point.
Tom Bulkowski, the veteran analyst, says these patterns have a 61% success rate of meeting their upside targets. He gave the example of the cup-and-handle pattern that formed on the Dow Jones chart during the Great Depression of the 1930s and 1940s. The cup took nine years to develop, and another four years for the handle to develop. It reached its upside target in the 1950s. Ethereum and Bitcoin are likely to be in the handle stage of a similar cup-and-handle pattern. The two cryptocurrencies are waiting for a breakout move above the pattern’s resistance level of 0.08BTC. It has been fluctuating lower inside the handle range for a pullback toward the lower trendline at 0.05.
Overall, the ETH/BTC pair has declined 14% since a peak on September 8.