For the past few years, Bitcoin and Ethereum have tried to compete on performance. Although the market capitalization gap is still huge, Ethereum is working hard to improve. A year ago, in July 2020, the value of ETH was 3% of the price of Bitcoin, but at the time of writing it was 6%. At the beginning of May it rose temporarily to 8.5%.

Ethereum has relatively escaped the shadow of Bitcoin in recent bull runs, and in terms of volatility, the world’s largest altcoin is also more reactive. However, there is one particular factor that Ether is likely to benefit from.

The actual correlation volatility spread between Ethereum-Bitcoin. Source: Skew

The graph above illustrates the actual correlation volatility difference between ETH-BTC for both assets, and the volume difference increases or decreases depending on which asset is more volatile in a given time.

In the past, whenever the spreads on the chart increased, Ethereum was able to outperform Bitcoin in terms of bull rallies and vice versa. Here is a prime example

Source: trade view

From September 25, 2020 to January 1, 2021, the ETH-BTC volatility spread fell from 36% to 14% in the chart. That means Bitcoin is relatively more volatile than Ethereum. That volatility shifted on the charts as the value of Bitcoin rose 169% while the value of Ethereum rose 111% over that period.

The metric turned in 2021 when volatility spreads began to widen and the situation became more favorable for Ethereum. Within a month, the spread rose again from 14% to 37%, and Ether outperformed Bitcoin with 97% growth compared to BTC with 64%.

Now, since the beginning of April, the volatility spreads on the charts have been relatively high again, which means that Ethereum will experience a lot of volatility in the future. However, it doesn’t always go in the bullish direction.

The key to eliminating the volatility differential between Ethereum and Bitcoin, which has been growing since late April, is that it has accumulated during both a strong bull run and a brutal downward correction. Both assets hit all-time highs during this period, but Ethereum has a better growth rate.

As the downward pressure began to mount, Ethereum fell further than Bitcoin on the chart. Bitcoin was down 48% while ether fell 60% over the 10-day period from May 10 to May 23.

With volatility spreads, which are currently at annual highs, it can be assumed that Ethereum can close the gap to ATH faster than Bitcoin if the market moves upwards. However, any downward pressure could push Ether down on the chart.

Annie

According to Ambcrypto

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