3 Indicators That Major Investors Prefer Ether to Bitcoin

The futures and options market, often regarded as an indicator of substantial financial movement, is shifting its preference towards ether instead of bitcoin.

Bitcoin, known for its status as the top cryptocurrency by market value, has recently surged to unprecedented levels, surpassing $110,000. Data reveals that it has appreciated by more than 16% this year, buoyed by broader economic influences and continuous investments in bitcoin spot exchange-traded funds.

Conversely, ether has experienced a decline of 20% this year, even as its associated blockchain, Ethereum, continues to lead in decentralized finance (DeFi) and tokenization sectors.

However, the current disparity in performance may soon reconcile, as recent indicators suggest a more favorable sentiment towards ether.

Options reveal increased optimism for ether

The options market on Deribit indicates a markedly stronger bullish positioning for ether compared to bitcoin.

Options are financial contracts that allow buyers the right, but not the obligation, to acquire the underlying asset at a specified price within a certain timeframe. A call option signifies the right to purchase and is typically associated with positive market expectations, while a put option offers a safeguard against price declines.

At this point, both BTC and ETH’s 25-delta risk reversals—an indicator of sentiment based on the difference in implied volatility between calls and puts—are in positive territory, showing a leaning towards call options.

Notably, the cost of ETH risk reversals is higher than that of BTC, signifying that traders are expressing greater optimism towards ether than bitcoin.

CME futures open interest growth

The notional open interest in CME bitcoin futures, which reflects the total value of outstanding contracts, has increased nearly 70%, exceeding $17 billion since the early April decline.

However, this increase has leveled off just above the $17 billion mark over the last week. The CME serves as a barometer of institutional trading activity.

In contrast, open interest for ether has surged by 186% to $3.15 billion since the April downturn, with growth accelerating over the recent two weeks.

The contrasting trends indicate that institutional interest is increasingly directed toward ether.

Shifts in futures premiums and funding rates

The enthusiasm for ether is also apparent in the comparatively higher premiums associated with ether futures.

At the moment, one-month ether futures show an annualized premium of 10.5%, marking the highest level since January. In contrast, the bitcoin futures premium sits at 8.74%.

Higher premiums indicate a strong confidence and demand, which often points to a favorable market outlook. Thus, the elevated ether futures premiums suggest that traders are adopting a more hopeful stance toward ETH over BTC, especially as ether remains 84% below its peak from the 2021 market surge.

It’s also plausible that BTC’s basis is being kept lower due to cash-and-carry arbitrage strategies by traders who are not taking directional bets.

A similar divergence in funding rates can be seen across offshore exchanges, where the annualized funding rates for long positions in ether perpetual futures is nearing 8%, while funding rates for bitcoin perpetual futures linger below 5%.