Most traders have noticed that the price of Ether (ETH) has been ahead of Bitcoin (BTC) for several months and that the ETH / BTC ratio has increased by more than 230% in 2021, recently peaking. 089 BTC December 9.
ETH / BTC pair on Coinbase. Source: TradingView
In short, Ether’s $ 490 billion market capitalization currently represents 54% of Bitcoin’s $ 903 billion total. In 2020, this rate ends at only 15%, so it can be concluded that there has been a certain “downturn”. It may still be a long way from what Ethereum’s maximalists envision, but it’s still a pretty respectable run.
Instead of analyzing the rationale behind this move, or worse, predicting the outcome based on some uncertain expectations, analysts should study the market structure of each coin.
For example, do futures premiums show similar trends for both coins, and how does the long versus short relationship of professional traders compare? These are the most suitable indicators for determining if a move is strong enough to continue.
Ether futures premium
Quarterly futures are the preferred tool for whales and arbitrage tables, but due to settlement dates and the variance in the cash market, they can seem daunting to retailers. … However, the most notable benefit of these quarterly contracts is that there are no fluctuations in funding rates.
These fixed-month instruments usually trade slightly above the spot market price, indicating that sellers are charging more money to delay payments for a longer period. Hence, futures should be traded in healthy markets at an annual premium of 5 to 15%. This situation is known as “contango” and is not exclusively limited to the cryptocurrency market.
Bitcoin and Ether futures contracts mechanism. Source: Laevitas.ch
By comparing both charts, we can see that Bitcoin futures are trading at an average annual premium of 2.6% for March 2022 and 4.4% for June 2022. This corresponds to 2.9% and 5% ether, respectively. Hence, it is clear that whales and arbitrage tables charge a higher Ether premium and this is a bullish indicator.
Bitcoin Long / Short Ratio Falls
To effectively measure the positions of professional traders, investors must track the long / short ratio of top traders on top crypto exchanges. This metric provides a broader view of traders’ effective net positions by collecting data from multiple markets.
It should be noted that exchanges collect data on top traders in different ways, as there are several ways to measure net customer exposure. Therefore, any comparison between different suppliers should be based on a percentage change, not an absolute number.
The long-to-short ratio for top bitcoin traders is currently 1.21 on average, up from 1.39 on December 5. Compared to 1.59 two weeks ago, this shows that the buyer (buyer) has reduced their share of impressions by 24%. Here, too, the absolute number matters less than the overall time frame change.
The ratio of long and short positions among the leading ether traders. Source: Coinglass
Meanwhile, Ethereum Whales and Arbitrage Boxes showed a positive change in sentiment on December 5 after the price of long and short positions rose from 1 to 1.16. Comparing the average data as of November 25, the value of long and short positions of the leading ether traders decreased by 20% from 1.43.
The data shows that Ether traders are more confident than Bitcoin traders.
For derivative dates, ether is now preferred as the underlying asset rate is now higher for futures. In addition, the improvement in the prices of leading traders since October 5 signals confidence in volatile times as the price of ETH has dropped 16% from its all-time high of $ 4,870.
Bitcoin investors may be distrustful as the price is 31% below its all-time high of $ 69,000 on Nov 10. It is impossible to tell if it is cause or effect. However, based on the futures premium and long-to-short data, Ether seems to have enough incentive to keep outpacing the rally.