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.

Cryptocurrency Exchange Huobi Global to Leave China This Month

Cryptocurrency Exchange Huobi Global to Leave China This Month

Digital asset exchange Huobi Global has revealed its intention to exit the Chinese Market. The crypto trading platform with Chinese roots said it will stop processing transactions for existing users on the mainland by the end of the year.

Huobi Global Halts Services in the People’s Republic

Crypto exchange Huobi Global is going to discontinue services for users based in mainland China this month. In a statement quoted by the English-language Chinese TV channel CGTN, the company announced on Sunday that starting from 11:00 a.m. Beijing time on Dec. 14, users in the People’s Republic will not be allowed to purchase cryptocurrencies.

Huobi Global further detailed it will cease crypto exchange operations on the following day, Dec. 15, and terminate all crypto asset trading by 12:00 p.m. on Dec. 31. However, traders will still be able to log into their accounts and apply for the withdrawal of remaining assets within the next one to two years, emphasized the platform, which has not accepted new customers from China since September.

The report notes that several cryptocurrency exchanges are preparing to pull out of the Chinese market by the end of 2021. Their moves come after Beijing’s decision this year to reiterate restrictions on cryptocurrency transactions which was followed by a crackdown on trading and mining. Besides Huobi Global, the list includes other major platforms such as Binance and Kucoin.

The state-run CGTN remarks that China has been stepping up efforts to limit the crypto market amid what it calls a global cryptocurrency crackdown. “Concerns grow that the highly volatile digital currencies could undermine the stability of financial and monetary systems, increase systemic risk, promote financial crime and hurt investors,” the news service adds.

The People’s Republic banned crypto-related activities back in 2017 and while the government went after coin trading and token sales, authorities did not interfere with mining until this spring. In May, the State Council, the cabinet of ministers in Beijing, decided to clamp down on the crypto industry following President Xi Jinping’s pledge for the country to achieve carbon neutrality in the next four decades.

Leading mining hardware producer Bitmain provided another example of a major crypto company exiting the Chinese market. In October, the Beijing-based manufacturer announced it will no longer ship its products to the mainland, explaining the move was in response to local regulations. As is the case with other businesses, Bitmain stressed the decision does not concern its operations in the special administrative region of Hong Kong and neighboring Taiwan.

Do you expect more crypto companies to pull out of the market in mainland China? Tell us in the comments section below.

Huobi Research Report ‘Taper Landed’ Paints Bleak Picture for Cryptocurrency Assets

Huobi Research Report 'Taper Landed' Paints a Bleak Picture for Cryptocurrency Assets

A report issued by the Huobi Research Institute, the investigative arm of the Asian exchange, examines the effect that upcoming changes of U.S. Federal Reserve policy could have on the price of cryptocurrencies. The report, titled “Taper Landed: The Turning Point of The Cryptocurrency Market is Coming,” states that due to the upcoming tapering, the continued growth of high-risk assets (including cryptocurrency) could be difficult to maintain.

Huobi Report Examines Fed Taper Effects

Huobi Research’s latest report, titled “Taper Landed: The Turning Point of The Cryptocurrency Market is Coming,” establishes the possible route cryptocurrency prices could take due to the action of the Federal Reserve taper. The taper — that is, the continual reduction of dollar liquidity in the market due to reduction in bond purchases — could negatively affect the growth of bitcoin and other assets.

The taper discussion started months ago, and according to study forecasts, it could start next June, with a reduction of the purchases of bonds and the end of quantitative easing (QE). This reduction is expected to hit not only bitcoin, but also high-risk assets first, and its effect to move down to more established assets later.

End of Stock-to-Flow

“Taper Landed” also takes a few jabs at the well-known stock-to-flow (S2F) model, which predicts the rise of bitcoin’s price based on its availability and production in the market. The report, which was written on November 24, predicted this model would fail due to its limited consideration of economic elements surrounding bitcoin. William Lee, of Huobi Research, explained:

Why does the “victorious” bitcoin S2F model suddenly fail? Because Plan B only considered the monthly SF ratio of bitcoin and historical bitcoin price data when constructing the model, but ignored the impact of external macro changes on the market.

Lee further explains that the growth in bitcoin’s price has to do with the loosening of economic policies that the U.S. and other governments undertook, ostensibly to save the market during the coronavirus pandemic. But with the start of the so-called taper, and the upcoming interest hike that normally happens after taper periods, this bubble in stock growth and cryptocurrency price hikes could pop next year, according to the report.

If the taper process accelerates, these effects could be felt even more quickly on the market, the study concludes.

What do you think about Huobi Research Institute’s taper study? Tell us in the comments section below.