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Decoupling: What does it mean in trading?


In crypto circles, it has been observed that some assets move in lock-step and are heavily correlated.

For example, when Bitcoin prices expand, they tend to lift the whole crypto market.

At the same time, when Ethereum prices rally, DeFi tokens rise in tandem.

However, there are times when this positive correlation is broken, and the price of one asset 'decouples’.

Decoupling in trading can be defined as a state where the price of an asset diverges from the expected pattern.

Whenever there is a wholesale divergence, and the price of assets behave differently from the expected pattern, traders say there has been a decoupling.

And there have been examples before.

When XRP prices, in late November to early December before the bombshell announcement from the SEC, rose, the dreaded XRP Army said the coin had finally 'decoupled' from BTC.

This independence is, of course, yearned. Fundamental traders often relate the likelihood of decoupling from BTC as a marker of maturity. What they meant is that Ripple's fundamentals and not BTC's price gyration now had an impact on XRP.

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