Bitcoin and ether both surged this week, the former hitting a 28-month high and the latter surpassing $20 for the first time. The combined rally of these two digital currencies from 10th June to 17th June helped shed further light on their relationship, a matter that has frequently drawn the attention of market analysts.
To date, the price of bitcoin and ether have correlated positively at some points and negatively at others. Since the two both surged in value in the week ending at 12:00 UTC on 17th June, their correlation was positive during the period, though on closer inspection this relationship is more inconclusive.
This situation contrasts significantly with the times when bitcoin and ether moved in different directions, which prompted some analysts to portray them as competitors. Sometimes, this negative correlation coincided with market observers highlighting bitcoin's challenges and ether's perceived flexibility.
But recently, the two have pushed higher in tandem, experiencing a positive correlation at a time when several developments have been grabbing the attention of market observers.
The upcoming halving on the bitcoin network and economic uncertainty in China all came up as factors that helped influence bitcoin markets.
Bitcoin climbed 33% during the seven-day period, opening at $576.45 on 10th June and closing at $767.45 on 16th June, CoinDesk USD Bitcoin Price Index (BPI) data reveals. This sharp rally took place amid modest trading volume, as market participants traded 12.8m BTC in the week ending 17:00 UTC on 17th June, according to Bitcoinity figures.
Ether rose even more, enjoying a 42.6% week-over-week gain, Poloniex data shows. This climb took place amid highly erratic transaction activity, as daily trading volume ranged from as little as $11.3m on 10th June to as much as $64.4m on 14th June, according to CoinMarketCap figures.
This higher figure came very close to the all-time daily high of $65.3m that ether reached in March.
Growth begets volatility
Overall, the two digital currencies experienced sharp fluctuations during the week, as bitcoin started climbing sharply higher at 22:30 UTC on 11th June, resulting in the digital currency rising roughly 25% to $719.85 at 14:45 UTC on 13th June, BPI data shows.
After climbing to this high, bitcoin fell more than 8% to $661.60 at 14:45 UTC on 14th June. These losses were quickly recouped, as bitcoin rose to a closing value of $767.45 on 16th June.
Ether experienced even sharper gyrations, surging more than 30% from its opening price of $14.38 to $18.94 at 11:20 UTC on 14th June, Poloniex figures show.
The currency then fell by roughly 20% to $15.18 by 16:55 on 14th June, before surging to an all-time high of $21.10 at 19:15 UTC on 16th June.
Before the week ended, ether dipped slightly to open 17th June at $20.51, and later in the day, its price would decline sharply on negative news stemming from ongoing issues at one of its signature projects.
Going forward, developments such as the halving, economic uncertainty in China and the latest news surrounding The DAO will likely help draw attention to both digital currencies.
The halving of rewards on the bitcoin network, in particular, has been prompting market experts to give their two cents on the future of the value of tokens on the network. Rik Willard, founder and managing director of Agentic LLC, has forecast that bitcoin prices will enjoy a “pop” following the halving, as it will reduce the amount of new bitcoins generated daily.
"The halving should spur more commercial blockchain applications which should spur price,” he said.
Not everyone provided a bullish point of view, as Tim Enneking, chairman of cryptocurrency investment manager EAM, told CoinDesk that he thinks "bitcoin prices will experience some softness after the halving".
He emphasized that bitcoin has "more than doubled" from when it was "hovering below $400," but predicted that this upward climb will not continue.
As a result, Enneking told CoinDesk he "would be very wary of making major long bets going forward".
However, whether ether will be affected by this remains to be seen, and doubtless its reaction to bitcoin's halving will prove to be another important data point in understanding how these markets are correlated.
Charles L. Bovaird II is a financial writer and consultant with strong knowledge of securities markets and investing concepts.
Follow Charles Bovaird on Twitter here.
Rollercoaster image via Shutterstock
CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.