While increasing decorrelation suggests the market is maturing and becoming more sophisticated, secondary factors could cause some major altcoins to decouple and chart their courses away from Bitcoin’s narrow dominance.
Over the past two months, Bitcoin (BTC), the world’s most valuable cryptocurrency, has become increasingly decoupled from XRP, the native currency of the XRP Ledger (XRPL), and BNB, the currency that powers the broader Binance. While this is successful, Dogecoin (DOGE) and Cardano (ADA) remain mostly correlated with Bitcoin.
Bitcoin Moves Forward Unscathed
Bitcoin has more than doubled in value since the beginning of the year, leaving the horrors of crypto winter far behind. A closer examination revealed that the coin has remained stable in 2023, undeterred by developments affecting other cryptocurrencies in the market.
The latest Binance/Changpeng Zhao (CZ) Fiasco failed to give BTC a big scare. A similar story unfolded earlier in the year, when the prized asset managed to remain resilient despite scrutiny of other altcoins by US regulators.
According to AMBCrypto analysis of CoinMarketCap data, Bitcoin’s market capitalization has expanded from 39% at the beginning of the year to 51% by the end of November 2023. Meanwhile, the market share of some popular coins such as BNB dropped sharply.
XRP and BNB Decouple from Bitcoin
Trading data from Kaiko, a blockchain analytics company, @cryptobusy on X notes that the correlation between Bitcoin, XRP, and BNB has been contracting over the past two months. Meanwhile, the prices of BTC, Dogecoin, and Cardano have been moving synchronously even though the fundamental factors of each project have impacted the price action during this period.
Major altcoins like BNB, Ripple [XRP], and Solana [SOL] were the most untethered from the king coin, while BNB’s 60-day correlation with BTC fell from 80% in 2022 to 60% in 2023, XRP fell from 75% to 45%. On the other hand, Cardano [ADA] and Dogecoin [DOGE] still maintained a strong relationship with the king coin.
BNB, XRP, BTC Affected by Fundamental Factors
Still, there could be more that explains the decoupling, especially with BNB and XRP. Fundamental seismic events have impacted the BTC, XRP, and BNB ecosystems over the past two months. The U.S. Securities and Exchange Commission (SEC) is likely to approve multiple Bitcoin spot ETFs filed by several heavyweights, including BlackRock and Fidelity, in the coming weeks. Hopes that the regulator will authorize these derivatives that track BTC spot prices have catalyzed demand, lifting the coin to new highs in 2023.
Meanwhile, a US court ruled in favor of XRP being a utility when sold to retailers. The case initially forced prices higher, but the currency dropped in late Q3 2023 and 2024, only stabilizing as BTC recovered. BNB was negatively affected by the resignation of Changpeng Zhao, the founder of Binance, in November 2023. The Department of Justice also fined Binance a fine of $4.3 billion as a settlement.
When an asset stops reacting strongly to the price action of other similar assets, it makes financial sense to include them in the portfolio. Smart investors spread their investments across different cryptocurrencies, reducing their exposure to any one type of asset. Whether or not it is worth buying Bitcoin remains to be seen, as it is best to conduct some research before making major investments decisions.
By Leonardo Perez
