In a surprising turn of events, Ethereum’s native token ETH is stealing the spotlight from Bitcoin (BTC) as the king crypto’s meteoric rise takes a breather. With BTC struggling to break through formidable resistance at the psychologically significant $100,000 level, profit-taking appears to be in play. However, rather than cashing out entirely, savvy investors are rotating capital into the smart contract giant Ethereum.
Monday’s trading session saw ETH surge an impressive 4%, handily outpacing BTC’s 1.5% dip and the modest gains posted by the broader CoinDesk 20 crypto benchmark. This rotation comes on the heels of the ETH/BTC ratio plunging to a three-year low last week as Bitcoin’s blistering post-election rally left altcoins in the dust.
ETH Poised for Short-Term Dominance
With the ETH/BTC ratio rebounding 15% off those multi-year lows, market participants are growing increasingly bullish on Ethereum’s prospects in the near term. Joshua Lim, head of derivatives at Genesis Global Trading, noted significant ETH buying activity from crypto-native hedge funds and family offices looking to capitalize on the rotation.
The options market is also signaling a favorable risk-reward setup for ETH in the coming weeks. Data from analytics firm Glassnode reveals a heavy skew towards short-dated ETH call options, suggesting traders are positioning for upside in the near term. For BTC, however, the call skew is more prevalent in longer-dated maturities stretching into late December and beyond.
“The market seems to be expecting BTC to trade sideways until December as attention shifts towards ETH in the near term,” said QCP Capital in a recent research note.
Institutions Fuel ETH Demand
The rising institutional adoption of Ethereum is also acting as a tailwind for ETH. Yash Patel, general partner at Telstra Ventures, highlighted the significance of ETH-based exchange-traded products (ETPs) in driving fresh capital into the ecosystem.
“We saw record inflows into physically-backed ETH ETPs last week, most notably the $99 million allocation into Blackrock’s ETHA product,” explained Patel. “These vehicles make it much easier for traditional investors to gain exposure, and the uptick in volumes suggests institutions are starting to appreciate Ethereum’s value proposition.”
Bitcoin Awaits Catalyst
As for Bitcoin, the $100,000 resistance continues to cap upside for now. With prices stretched well above key moving averages, consolidation may be healthy before the next leg higher. Paul Howard, senior director at crypto trading firm Wincent, sees BTC oscillating around these levels until further catalysts emerge.
“There is a significant sell wall at the psychological $100K level. I would expect we oscillate around these levels until the new year. Staying market neutral and buying downside protection here is always a sensible risk reward.”
— Paul Howard, Wincent Senior Director
While profit-taking can be painful for BTC bulls, it may prove a blessing in disguise if dip buyers emerge to fuel the next wave higher. Moreover, the rotation into ETH and other altcoins could help the broader crypto market decouple from Bitcoin’s outsized influence. In the long run, a more diversified, less BTC-centric crypto economy may pave the way for a healthier, more sustainable market structure.
In the meantime, ether looks poised to outperform as Ethereum’s ecosystem grows in stature. With ETH staking yields expected to rise following the Shanghai hard fork, DeFi activity picking up steam, and the Surge scalability upgrade on the horizon, there are plenty of fundamental drivers to support further ETH appreciation against BTC.
