Derivatives Metrics Indicate a Shift: Traders Focusing on Ether Over Bitcoin
Recent metrics from the futures and options markets suggest a notable shift among sophisticated market participants and traditional finance players, signaling a potential rotation of funds from Bitcoin (BTC) into Ether (ETH).
Amid Bitcoin’s robust performance, boasting over a 60% gain this quarter, Ether has shown relative lag, with a 35% increase in the same period, as per CoinDesk data. However, key indicators in the derivatives market now point towards a growing interest in Ether, hinting at a potential outperformance compared to Bitcoin in the coming weeks.
One significant observation is the increasing flow of money into Ether futures, surpassing the rate of investment in Bitcoin. The notional open interest in the Chicago Mercantile Exchange’s cash-settled Ether futures contract has surged by 30% in the last five days, reaching $711 million. In contrast, Bitcoin’s growth in this metric is 19%, totaling $4.9 billion. The positive spread between pricing for Ether and Bitcoin CME futures further supports this trend, with a 5% higher premium observed in Ether futures relative to the spot index price.
Reflexivity Research notes that the futures basis for Ethereum on CME is trading at a 5% premium compared to Bitcoin, exceeding 20%. The rise in open interest for ETH on CME, following a lag in the initial Bitcoin surge, raises the possibility of traditional finance (tradfi) players rotating into the Ether ETF trade.
In the options market on Deribit, traders are displaying a preference for Ether calls and Bitcoin puts. The one-month Ether call-put skew, measuring the spread between implied volatility premium for call and put options expiring in four weeks, has doubled to over 4% this month, indicating a strengthening call bias. In contrast, BTC’s one-month skew has declined from 5% to 2%, suggesting a shift towards puts relative to calls.
While Bitcoin has experienced a strong rally, there are indications that it might take a breather, potentially allowing Ether to catch up in the upcoming weeks. Reflexivity Research advises continued monitoring for early signs of the market anticipating a potential Ether ETF.