Ethereum correlation with the U.S. equities hit record high as ETH holds $2.5K-support

Ethereum correlation with the traditional financial market reached a record high. Image from Unsplash
Ethereum correlation with the traditional financial market reached a record high. Image from Unsplash

Key Takeaways:

  • Ethereum-stock market correlation reached a new record high on Feb. 2.
  • Meanwhile, ETH prices jumped 19.2% since Jan 28.

NEW DELHI (CoinChapter.com) — Ethereum’s native token Ether (ETH) seems to be following Bitcoin (BTC) steps as the prime altcoin’s correlation with the traditional financial markets reached a new record high.

As per a report from Bloomberg, the world’s second-largest cryptocurrency’s 40-day correlation coefficient for ETH and the S&P 500 has topped 0.65. To recap, correlation helps measure the movement of an asset with a benchmark index.

Ethereum correlation with the S&P 500. Source: Bloomberg
Ethereum correlation with the S&P 500. Source: Bloomberg

Moreover, Bitcoin’s correlation with the stock market has recently increased too. The increasing correlation with traditional financial markets would hurt the credibility of Bitcoin, Ethereum, and cryptos in general, as a hedge against inflation and market uncertainty.

Increasing institutional investments may likely have fueled the growing correlation between Ethereum and the traditional financial markets.

ETH’s Balance On Exchanges Increasing

The amount of Ethereum held across all exchanges is slowly increasing, a sign that usually means increasing selling pressure for the asset.

Also Read: Ethereum recovers some lost ground, but ETH price struggles to move above $2.7k.

In detail, the increasing amount of ETH on exchanges indicates investors are moving Ethereum tokens from private wallets to exchanges. As such, it might indicate a lack of confidence in Ethereum’s price action since investors are readying for selling the token if prices go down.

Ethereum's balance on exchanges. Source: Glassnode
Ethereum’s balance on exchanges. Source: Glassnode

In addition, the rise in exchange balance nearly coincides with the beginning of Ethereum’s price downtrend.

Over the last seven days, ETH prices are recovering from the late Jan market rout that pushed its prices to levels last seen in Aug 2021. The prices are up 21% between Jan 27’s low of $2,317 to Feb 2’s high of $2,813.

ETHUSD price performance in the last seven days. Source: CoinMarketCap.com
ETHUSD price performance in the last seven days. Source: CoinMarketCap.com

However, the Ethereum token’s price is currently down 43.7% from its ATH of $4,951.

Ethereum Price Charts

The Ethereum token’s 50-day Moving Average (purple wave) crossed below ETH’s 200-day exponential MA line on Feb 1, charting a bearish technical pattern called the death cross.

Also Read: Will Ethereum recover as FUD turn to FOMO?

In detail, a death cross forms when a token’s short-term moving average trendline moves below a relative long-term moving average. Traders believe the technical pattern signals negative sentiment and weakness.

ETHUSD on the daily chart with RSI. Source: Tradingview.com
ETHUSD on the daily chart with RSI. Source: Tradingview.com

After Ethereum’s recent rally took price above the $2,600 resistance, ETH now targets the $2,850 resistance level. Further upside movement would take ETH near the token’s descending trendline resistance, challenging the psychologically key resistance level near $3,000.

In case of a sustained uptrend and a break above descending trendline, ETH could reach $3,150 before prices pull back. Meanwhile, the relative strength index’s trendline is rising steadily upwards, currently neutral with a value of 44.05 on the daily charts.

On the other hand, if bears take to profit-booking, ETH prices could fall to immediate support near $2,600. Moreover, a sustained sell-off could bring the $2,500 resistance level into play.

Lastly, a key support level for ETH, which the token tested multiple times during the recent crash, is near $2,300.

At the time of writing, ETH was trading at $2,744, down 1.58% on the day.

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Ethereum, Ethereum correlation with the U.S. equities hit record high as ETH holds $2.5K-support

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