The crypto market has been on the front foot since the start of the year, outperforming other asset classes by a significant margin. Almost all cryptocurrencies, including Bitcoin and Ethereum, have posted impressive rallies, with BTC slightly outperforming ETH year-to-date.

However, an analysis of the price performance of the two largest cryptocurrencies by market cap shows that Ethereum has outrun Bitcoin since early July last year.

Crypto Market Rallies as Hong Kong Announces Positive Regulations

Hong Kong has recently drafted plans to allow retail investors to trade certain cryptocurrencies on licensed exchanges. The move marks a significant improvement in the city’s regulatory regime that previously prohibited all retail investors from trading crypto.

The growing narrative of Asian flows likely helped the crypto market gain additional strength. However, an assessment of Bitcoin’s return by trading sessions shows that this narrative is exaggerated, blockchain research company Arcane said in a recent report.

The report added that since Bitcoin bottomed in November, the flagship cryptocurrency has seen “a healthy and stable uptrend” during Asian hours, while returns during the U.S. session have been more erratic. Furthermore, the major rallies in January occurred during the U.S. trading session, whereas last week’s rally occurred during European hours.

Ethereum has Outperformed Bitcoin Since July 2022

In June last year, the price of Ethereum was under a lot of pressure as Celsius’ exposure to Lido Staked Ether (stETH), a token that represents staked ETH in Lido, led to a massive sell-off. Ethereum eventually bottomed by the end of that month after falling below $1,000.

Since July, the second-largest cryptocurrency has gained around 61%, data by Arcane shows. During the same period, Bitcoin registered 29%. As for why Bitcoin has performed weaker since July last year, the answer lies in global market liquidity.

An assessment of BTC’s relationship to liquidity by Noelle Acheson, former head of market insights at crypto lender Genesis, reveals that BTC’s lack of cash flows makes the coin highly responsive to changes in global market liquidity. Arcane said:

“We would also like to add that we believe that parts of BTC’s extremely strong correlation to U.S. equities in 2022 was fueled by the massive focus on growth from companies affiliated with the crypto industry during the bull market., leading to excess leverage, in addition to BTC’s indirect relationship to growth assets through Tesla’s sizable BTC exposure.”

It is worth noting that BTC and Nasdaq continue to have a strong correlation during U.S. trading hours. Both indexes moved higher in early January amid optimism around slowing inflation and reopening in China. Arcane noted that Bitcoin’s excess performance is likely driven by global demand.

Meanwhile, the current rally in the crypto market is likely caused by internal forces. Bitcoin and Ethereum gained around 15% last week despite the increasing regulatory pressure in the US. Furthermore, there was not any specific development in broad financial markets that could have driven the rally.

This shows signs of independent crypto strength and potential decoupling from equities. “This is a positive tendency, as it might reignite external demand for BTC as a portfolio diversifier,” Arcane said.

Nevertheless, Bitcoin is trading over $24,100, down by around 2% over the day. Ethereum is hovering around the $1,640 mark, also down by about 2%. The broader crypto market has been broadly flat over the past 24 hours.

This article originally appeared on The Tokenist

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