Historically, bitcoin has shown relatively low correlations with traditional asset classes over entire four-year crypto cycles. While those relationships have evolved as cryptocurrencies have become more integrated into financial markets through futures, exchange-traded funds (ETFs), and ETPs, bitcoin has generally maintained diversification characteristics distinct from many traditional assets.
The issue becomes more complicated when investors move beyond bitcoin. Ether and SOL are generally less liquid and more volatile than bitcoin. Since the beginning of 2026, ether and SOL have shown approximately 35% and 44% higher volatility than bitcoin, respectively. Therefore, diversification within cryptocurrencies often increases volatility. Whether this improves diversification depends on correlations. A volatile asset that moves in the same direction as the rest of the portfolio can reduce the benefits of diversification, while one that moves differently can enhance them.
Historically, SOL has acted as a better diversifier than ether. Over the four years through April 2026, bitcoin’s correlation with ether was 0.78. In contrast, SOL’s correlation with bitcoin was 0.72. SOL was therefore slightly less likely to move in the same direction as bitcoin each week. More importantly, when SOL was not moving in the same direction as bitcoin, ether was historically less likely to move in the same direction as other parts of a traditional portfolio, such as stocks. SOL’s correlation with the S&P 500 index was slightly lower than that of bitcoin and ether. If historical correlations are any guide, SOL could act as a better diversifier than ether.
