Since mid-March when bitcoin began outperforming ether against the backdrop the U.S., the correlation between bitcoin and ether returns has declined. In a report published on Friday, Coinbase attributed the decline in correlation between bitcoin (BTC) and ether (ETH) returns to the U.S. financial turmoil.

The report noted that the decline in correlation was more pronounced after the Shanghai update, aka Shapella. A similar trend had been seen in September 2022, following the previous network upgrade, the merge.

Validators can now withdraw staked Ether after the Shanghai upgrade was completed successfully on April 12.

The analysts David Duong & Brian Cubellis wrote: “This falling correlation is relevant for institutional investors because it can impact quantitative strategies that rely upon cross-hedging (or using ETH to hedge less liquid altcoins).”

They wrote that from a fundamental point of view, “it supports arguments for diversification in favor holding both BTC AND ETH.”

The note stated that the initial phase of withdrawals of ether following the upgrade may still be in effect.

Coinbase estimates that by April 20, an additional 73,000 Ether could be unlocked through partial withdrawals, and 8222,000 ether unlocked via full withdrawals. This could take up to 15 days for the process.

QCP Capital: Ether/Bitcoin ratio likely to see deeper decline after Shapella upgrade

Sheldon Reback is the editor.