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The price dynamics of Bitcoin continues to be a primary influence on the value of Ethereum. Approximately 65% of the weekly price fluctuations of the second-largest cryptocurrency can be attributed to the price movements of the first cryptocurrency, according to analysts at Bitwise. The experts conducted an analysis of Ethereum’s price over a span of 406 weeks, starting from May 2018.
The analysts discovered a nearly linear correlation: for every 1% change in Bitcoin’s price, Ethereum responds with a movement of about 0.99% in the same direction. Essentially, the second-largest cryptocurrency is not traded as an independent asset but rather as a secondary instrument for investing in Bitcoin, stated blockchain specialists.
The second most significant factor, accounting for around 11% of the changes in Ethereum’s price, is economic conditions. This refers to the availability of money and credit: when macroeconomic factors are favorable and liquidity is high, Ethereum, as a risk asset, tends to rise. Conversely, tightening financial conditions lead to a decrease in its value, reported representatives from Bitwise.
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The flow of funds into Ethereum-based exchange-traded funds (ETFs) also has an impact, though it is not as substantial: they account for only about 10% of price changes, according to analysts.
Fundamental indicators of Ethereum have minimal effect on the price of ETH, experts noted. Network activity, specifically the number of active addresses, explains on average only about 6% of price fluctuations. Revenue from transaction fees holds even less significance, and analysts at Bitwise excluded it from their model, labeling it as “noise rather than signal.” Overall, the market currently does not perceive the Ethereum blockchain as a technology company with a stable cash flow, leading to a disconnection between the cryptocurrency’s market capitalization and its underlying network, stated Bitwise analysts.
Following the Fusaka update on the Ethereum network, the incidence of address poisoning attacks has sharply increased. According to analysts at Etherscan, over the past three months, the number of “crypto dust transfers” in USDT has surged by 612%.
