Analysts have observed capital flows shifting from Bitcoin to Ethereum, with derivatives markets indicating investors are hoping for more near-term upward momentum for the second-largest digital asset by market capitalization.
Open interest on Ethereum surged over the weekend, boosting confidence among derivatives traders as implied volatility increased and demand for call options became evident.
According to The Block’s price page, over the past 24 hours, Ethereum has risen more than 6% to trade above $3,513, while Bitcoin has fallen slightly by 0.5% and is currently trading at around $95,600.
“The tide over the past few sessions has shifted towards Ethereum, with outstanding interest on the exchange soaring to record highs over the weekend,” analysts at Wintermute said in their weekly cryptocurrency market update.
Ether Derivatives Show Strong Demand
The Bitcoin to Ethereum transition was characterized by a sharp increase in Ethereum’s implied volatility and a 12-month high in put-call skewness, indicating a strong preference for upside exposure. According to Wintermute analysts, traders are aggressively pushing the market higher by buying at the top.
“Large blocks over the weekend included the December 27 Ethereum call spread, with strike prices ranging from $3,600 to $5,000,” Wintermute reported. Analysts added that a notable 8-10 point premium in near-day Ether call contracts could drive hedging activity through the 10-day. – Risk reversal on the 25th.
This bullish momentum in Ethereum has sparked over-the-counter (OTC) demand for ERC20 tokens, with Pepe memecoin emerging as a notable beneficiary. The price of Pepe has risen by more than 54% in the past two weeks. “As Ether’s rally increases interest in altcoins, Pepe continues to make strong bids, especially in the layer 2 ecosystem,” Wintermute said.
QCP Capital analysts echoed Wintermute Trading’s observations, observing a steady rotation of capital flows from Bitcoin to Ethereum and other altcoins over the past 24 hours. A QCP analyst said, “The market expects Bitcoin to trend sideways until December and attention will shift to Ethereum in the short term.”
In derivatives markets, Ethereum risk reversals are biased in favor of short-term call options, while Bitcoin calls are seeing higher interest for contracts expiring after December 27, 2024, QCP Capital analysts said. The delay comes as traders were looking forward to President-elect Donald Trump’s cryptocurrency-friendly policies, which are expected to come into effect after he takes office on January 20 next year.
Despite strong spot ETF inflows and positive sentiment towards Bitcoin, the $100,000 selling wall has slowed the gains. QCP analysts highlighted that Bitcoin dominance has fallen from 62% last week to 59%, suggesting a gradual shift towards Ethereum and altcoins.
“If Bitcoin fails to decisively break $100,000, the shift to Ethereum and other assets could accelerate,” QCP analysts added. However, they noted that a potential catalyst, such as another large purchase by MicroStrategy, could reignite Bitcoin’s momentum and temporarily shift interest away from altcoins.
Disclaimer: Evgeny Gaevoy, founder and CEO of Wintermute, previously served on The Block’s Board of Directors from April 2023 to early November 2023 and remains a minority shareholder.
Disclaimer: The Block is an independent media outlet delivering news, research and data. As of November 2023, Foresight Ventures is a majority investor in The Block. Foresight Ventures invests in other companies in the cryptocurrency space. Cryptocurrency exchange Bitget is an anchor LP of Foresight Ventures. The Block continues to operate independently to provide objective, impactful and timely information about the cryptocurrency industry. Below are our current financial disclosures.
© 2024 The Block. All rights reserved. This article is provided for informational purposes only. It is not provided or intended to be used as legal, tax, investment, financial or other advice.