Altcoin enthusiasts are facing a potentially grim scenario as the ether-bitcoin (ETH/BTC) ratio teeters on the brink of a death cross on the weekly chart, indicating a possible long-term shift towards bearish momentum.
A death cross materializes when a short-term moving average descends beneath the long-term moving average, often signaling an extended period of bearish sentiment in the market. The impending formation of this pattern suggests increased risk aversion and diminished demand for alternative cryptocurrencies, such as ether.
Technical analysis paints a cautionary picture for altcoin bulls, with the ETH/BTC ratio edging below a critical support level and nearing the ominous death cross pattern. This development has not gone unnoticed by investors, as reflected in the options market sentiment.
Historically, the cryptocurrency market has experienced alternating phases of dominance between bitcoin and altcoins. Notably, periods of altcoin leadership coincide with a rising ETH/BTC ratio, indicating a willingness among traders to take on greater risk when ether outperforms bitcoin and vice versa.
In the current market landscape, the ETH/BTC ratio has dipped approximately 10% to 0.048 this year, according to data from TradingView. This decline has brought the ratio close to testing a crucial support level after breaching the 0.05 mark, prompting speculation among market observers.
Singapore-based QCP Capital noted in a recent market update that persistent selling pressure on ETH calls has subdued volatility and exerted downward pressure on ether prices. This trend may signal an early indication of bullish FOMO transitioning into fear, particularly with ether serving as a proxy for altcoins.
Additionally, pricing dynamics in the options market on Deribit, a leading derivatives exchange, suggest a bearish outlook for ether in the short term. Premiums for ether puts, which provide protection against price declines, have surpassed those for calls across various maturities, indicating prevailing pessimism among traders.
In contrast, sentiment towards bitcoin options leans towards calls across most maturities, underscoring a more bullish stance on the leading cryptocurrency.
As the ether-bitcoin ratio flirts with a potential death cross and options market sentiment tilts bearish, altcoin bulls face mounting challenges in sustaining momentum amid prevailing market headwinds.
