For over two years Bitcoin and Ethereum were trading in sync. However, recently both cryptocurrency exchanges decided that they are together no more and decided to decouple their 36 months old strategic partnership. One of the biggest reasons for ending their partnership is following a similar pattern in terms of profits and losses.
A relatively large number of retailers started to question the co-sync trade policy. They said that they are over-relying on both digital assets, as a result, the pressure of risk is mounting on them.
While both coins seem to be different in terms of economies of scale and economic nature, and financial use, but one thing was in common. Both currencies appeared to be moved in the same direction. In recent times Bitcoin and Ether shared the same graph regarding their profits and loss. In fact, they were rigidly synced.
The data collected regarding both cryptocurrencies illustrated that their investors experienced an overflow of investments during the bullish trend, in the meantime, the risk factor was there when the bullish trend is over. This correlation made Bitcoin and Ethereum trading predictable.
While discussing coexisting policy risks, Simon Peters said “adding two different cryptocurrencies which are highly correlated with each other surely adds more risk to the portfolio than adding value.” Simon Peters, crypto assets and multi cryptocurrency holder further added that the correlation between Bitcoin and Ether lately killed the element of surprise which is extremely important for making generating high profits.
“While a closely connected cryptocurrency portfolio could be a huge profit generator one month, you could see even greater losses in the following month if one currency goes down other will follow the same,” said Simon Peters. However, he stressed acquiring a portfolio of diverse nature and encouraged having diverse options. A successful investor never finds himself in a situation where feels like running out of options. But Bitcoin and Ethereum’s coexisting relation left many investors with lesser options.
Laim Bussell, head of Banxa, portrayed Bitcoin and Ether liquidity holds crypto traders back. Simon Peters, meanwhile, said that decoupling is on its way. Ether blockchain upgrade as Ethereum 2.0 would limit its similar pattern with Bitcoin. Moreover, this Ethereum upgrade will also burn a specific cut of transaction fees being collected from investors.
Bitcoin on the other hand is focused on minimizing its supply cap. Limiting its supply cap will reduce the number of bitcoins available for trade in the market. This would increase the demand for the world’s top cryptocurrency. The increased demand would increase the value of Bitcoin. Bitcoin and Ether both seem to have diverse plans for the future.