Data shows pro traders are currently more bullish on Ethereum than Bitcoin

ETH has outperformed BTC by more than 230% this year and derivatives data suggests traders believe the altcoin has a lot more upside.

Most traders have noticed that Ether (ETH) price has seriously outperformed Bitcoin (BTC) for months now and the ETH/BTC ratio has rallied more than 230% in 2021 and recently hit a new high at 0.089 BTC on Dec. 9. 

ETH/BTC pair at Coinbase. Source: TradingView

To put things in perspective, Ether’s $490 billion market capitalization currently represents 54% of Bitcoin’s $903 billion. This ratio finished 2020 at a mere 15%, so it is safe to conclude that some ‘flippening’ has occurred. It might still be far from what Ethereum-maximalists imagined, but it is still quite a respectable run.

Instead of analyzing the rationale for the move or, even worse, predicting the outcome based on some loose expectations, analysts should explore the market structure of each coin individually.

For example, is the futures’ market premium facing a similar trend on both coins and how does the pro traders’ long-to-short ratio compare? These are the most relevant metrics to determine whether a movement has the strength to continue.

The futures premium favors Ether

Quarterly futures are the whales and arbitrage desks’ preferred instruments but because of their settlement date and the price difference from spot markets, they might seem complicated for retail traders. However, these quarterly contracts’ most notable advantage is the lack of a fluctuating funding rate.

These fixed-month instruments usually trade slightly above spot market prices, indicating that sellers are requesting more money to withhold settlement longer. Consequently, futures should trade at a 5% to 15% annualized premium in healthy markets. This situation is known as “contango” and is not exclusive to crypto markets.

Bitcoin and Ether futures basis. Source: Laevitas.ch

After comparing both charts, we can see that Bitcoin futures trade at an average 2.6% annualized premium for March 2022 and 4.4% for June 2022. This compares to Ether’s 2.9% and 5%, respectively. As a result, it becomes clear that whales and arbitrage desks are demanding a larger premium on Ether and this is a bullish indicator.

Bitcoin’s long-to-short ratio declined

To effectively measure how professional traders are positioned, investors should monitor the top traders’ long-to-short ratio at leading crypto exchanges. This metric provides a broader view of traders’ effective net position by gathering data from multiple markets.

It is worth noting that exchanges gather data on top traders differently because there are multiple ways to measure clients’ net exposure. Therefore, any comparison between different providers should be made on percentage changes instead of absolute numbers.

Bitcoin top traders long-to-short ratio. Source: Coinglass

The long-to-short ratio for top Bitcoin traders currently stands at a 1.21 ratio average, down from the 1.39 on Dec. 5. Compared to the 1.59 figure from two weeks ago, this signals that buyers (longs) reduced their exposure by 24%. Once again, the absolute number has less importance than the overall change in the time frame.

Ether top traders long-to-short ratio. Source: Coinglass

Meanwhile, Ether whales and arbitrage desks showed a positive sentiment change from Dec. 5 after the long-to-short moved to 1.16 from 1.0. When comparing the average data from Nov. 25, top Ether traders’ long-to-short have been cut by 20% from 1.43.

Data shows Ether traders are more confident than Bitcoin traders

Current derivatives data favors Ether because the asset currently shows a higher futures basis rate. Furthermore, the improvement on the top traders’ long-to-short since Oct. 5 signals confidence at a delicate period when ETH price is down 16% from its $4,870 all-time high.

Bitcoin investors may be lacking confidence as its price stands 31% below the $69,000 all-time high on Nov. 10. There’s no way to know whether this is a cause or consequence. Still, judging by the futures premium and long-to-short data Ether seems to have enough momentum to keep outperforming.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Bitcoin and altcoins took a hit, but derivatives data reflects a calmer market

BTC and altcoins took a beating over the weekend, but data shows a market with healthier trading conditions, even if prices consolidate for the foreseeable future.

Looking at the winners and losers of the past week clearly shows that traders endured some serious heat as the total crypto market capitalization dropped by 12.7% when Bitcoin fell to $41,000. This sharp downside move knocked the figure from $2.37 trillion to $1.92 trillion on Dec. 3 and a total of $2 billion long future contracts were liquidated.

Top winners and losers from top 80 coins. Source: Nomics

Bitcoin (BTC) price retraced 14.6% over the past week, effectively underperforming the broader altcoin market. Part of this unusual movement can be explained by the performance seen in decentralized applications which held up better than most of the market. Data shows Ether (ETH) traded down 6.0%, Binance Coin (BNB) lost 7.3% and Solana (SOL) dropped by 7.8%.

This week’s top gainers include OKEx’s OKB token (OKB) and Bitfinex’s UNUS (LEO). Perhaps these benefited from not having a United States entity because the regulatory uncertainties in the region continue to increase. Moreover, scaling solutions Polygon (MATIC) and Algorand (ALGO) benefited from Ethereum’s $40 or higher network transaction fees.

Terra (LUNA) featured on last week’s top performers after its built-in token burn mechanism significantly reduced the supply. Meanwhile, Stacks (STX), previously known as Blockstacks, pumped after D’Cent wallet included support for SIP010 tokens.

Sharing solutions had a disappointing week

Among the worst performers were three decentralized sharing solutions: Theta Network (THETA), Filecoin (FILE), and Internet Computer (ICP). They were not alone, as some of the sectors’ altcoins below the top-80 also crashed. Siacoin (S.C.) endured a 34% drawdown and Ankr Network (ANKR) dropped by 31.8%.

Chiliz (CHZ) suffered direct competition after Binance successfully launched an independent soccer fan token called SANTOS. Initially, Chiliz’ platform was created to host exclusive promos, services and voting for their fan tokens and more recently the project ventured into the non-fungible NFT market. However, that initiative also lost impact after soccer player Neymar launched a collection with NFTStar.

Despite being among the bottom performers, decentralized exchange aggregator 1inch Network (1INCH) concluded a $175 million Series B investment round and these funds will be used to expand the protocol’s utility.

Tether’s premium and the futures’ perpetual premium held up well

The OKEx Tether (USDT) premium measures the difference between China-based peer-to-peer (P2P) trades and the official U.S. dollar currency, and in the past week it decreased slightly.

OKEx USDT peer-to-peer premium vs. USD. Source: OKEx

Currently the indicator has a 98% reading, which is slightly bearish, signaling weak demand from crypto traders to convert cash into stablecoins. Even at its best moment over the past two months, it failed to surpass 99%, so Chinese players have not been excited about the general market.

The overall impact of last week’s correction was a drop in the total futures open interest, down 28% to $16.7 billion. Nevertheless, the move was expected since the total market cap retraced and some $3.9 billion worth of liquidations took place during the week.

More importantly, the funding rates on Bitcoin and Ethereum futures quickly recovered from Dec. 3 price crash. Even though longs (buyers) and shorts (sellers) are matched at all times in any futures contract, their leverage varies.

Consequently, to balance their risk, exchanges will charge a funding rate to whichever side is using more leverage and this fee is paid to the opposing side.

BTC and ETH perpetual futures 8-hour funding rates. Source: Coinglass.com

Data reveals that a modest bearish trend occurred on Dec. 3 and 4 as the 8-hour funding rate went below zero. A negative funding rate shows that shorts (seller) were the ones paying the fees, but the movement faded as soon as BTC and ETH prices bounced 15% from their lows.

The above data might not sound encouraging, but considering that Bitcoin suffered considerable losses this week, the overall market structure held nicely. If the situation was worse, one would definitively not expect a 99% Tether premium or a positive perpetual funding rate.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.