According to a research report by Coinbase, the correlation between bitcoin (BTC) and ether (ETH) returns has been declining since mid-March, with the decline becoming more pronounced following the Ethereum blockchain's Shanghai upgrade. The report notes that the falling correlation can affect quantitative strategies that rely on cross-hedging one asset for the other and supports diversification arguments in favor of holding both BTC and ETH from a fundamental perspective. The weakening in the 40-day correlation of daily returns may continue for another two weeks due to the initial phase of ether withdrawals following the upgrade, with an estimated 73,000 ether to be unlocked in partial withdrawals and 822,000 unlocked in full withdrawals.

(By Will Canny)