Why Ethereum will continue to outperform Bitcoin during September
The crypto market has yet to recover from an increase in selling pressure over the weekend, with Ethereum and other cryptocurrencies nearing double-digit losses. Bitcoin has been one of the worst performers in recent days and could weaken during September.
In the coming weeks, market participants will have their attention focused on the Ethereum “Merge,” the event that will complete this network’s migration to a Proof-of-Stake (PoS) consensus. The narrative surrounding this event has allowed ETH’s price to lead the market for the past week.
As a consequence, Bitcoin has moved sideways with strong price action. Data shared by Joshua Lim, Head of Derivatives at Genesis Trading, looked at the metric called BTC dominance, the percentage of crypto market capitalization that is made up of Bitcoin, and the ETHBTC ratio.
On the latter, Lim claims the metric is at multi-year highs, despite the downside price action experienced by the major cryptocurrencies since December 2021. The ETHBTC ratio is at 0.0733 and its all-time high is at 0.0880.
The last time the metric was close to its current levels was at the beginning of the downtrend, last December. Will “The Merge” finally allow ETH to enter uncharted territory in this metric? Lim said while sharing the chart below:
(…) the “swing” when ETH mkt cap = BTC mkt cap occurs at ETH/BTC ratio of 0.0159. significant positioning in ETH calls reflects mkt consensus on continued ETH outperformance charts below show the ETH put/call ratio is only 0.24, significantly lower than BTC’s 0.53.
Market participants appear to be betting on Ethereum approaching the $3,000 and $3,800 range. Call Open Interest, the number of options contracts betting on ETH’s price increase, stands at 3.4 million while Put Open Interest, the number of contracts betting on the opposite, stands at on 808 396.
Institutions Favor Ethereum While Shorting Bitcoin?
The Bitcoin dominance metric is also at an all-time low of 40%. The downtrend in the crypto market has been termed as “Bear Market”, during these periods Bitcoin dominance often goes up, but this has yet to happen as the metric moves towards support.
A significant portion of BTC’s price action, Lim argued, is due to institutions gaining exposure to the asset. When the macroeconomic landscape turns bearish, the institution sells its Bitcoin. The expert explained:
BTC is already a significant % of the crypto allocation for most tradfi investors – this means not only is it the asset that is removed when the market turns, but also the asset that is shorted as a beta hedge
The number one crypto by market capitalization also sees obstacles in its narratives as the institution bets on ETH as a “sound money narrative,” Lim said. In contrast, BTC as a store of value and hedge against the inflation narrative has weakened and may continue on this track as “The Merge” approaches.
