The cryptocurrency market has yet to rebound from the spike in selling pressure that occurred over the weekend. Ethereum and other cryptos have almost experienced double-digit losses. Bitcoin is one of the most volatile cryptocurrencies these days, and could weaken in September.
In the coming weeks, market participants will have their attention set 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 in the past week.
Bitcoin’s price movement has driven it sideways. Data sharedJoshua Lim (Head of Derivatives) at Genesis Trading looked at the metric BTC dominance. This is the amount of crypto market cap that’s made up of Bitcoin. It also includes the ETHBTC/ETHC ratio.
Lim asserts that the metric is at multi-year peak levels despite negative price action experienced by large cryptocurrencies since 2021. The ETHBTC/ETH ratio stands at 0.0733, while its record high is 0.0880.
Last December, when the metric was near its current level, was the start of the downtrend. Will “The Merge” finally allow ETH to enter uncharted territory in this metric? Lim shared the following chart with us:
(…) the “flippening” when ETH mkt cap = BTC mkt cap occurs at ETH/BTC ratio of 0.0159. sizable positioning in ETH calls reflects mkt consensus of continued ETH outperformance charts below show ETH put/call ratio is only 0.24, substantially lower than BTC’s at 0.53.
Market participants appear to be placing their money on Ethereum as it approaches the $3,000-$3,800 mark. The Call Open Interest, the number of option contracts betting on ETH’s price increase, stands at 3,4 million while the Put Open Interest, the number of contracts betting on the opposite, stands at 808,396.
Institutions favor Ethereum while going short on Bitcoin
Historical lows for the Bitcoin Dominance metrics are also 40%. The downside trend in the crypto market has been labeled a “Bear Market”, during these periods the Bitcoin dominance often trends to the upside, but this is yet to happen as the metric moves into support.
A significant portion of BTC’s price current price action, Lim argued, is due to institutions getting exposure to the asset. Institutions sell their Bitcoin when the macroeconomic environment turns bearish. Expert explained:
BTC is already a sizable % of the crypto allocation for most tradfi investors – this not only means it’s the asset that gets de-risked when the market turns, but also the asset that gets shorted as a beta hedge
The number one crypto by market cap is also seeing hurdles in its narratives as institution bet on the ETH as a “sound money narrative”, Lim said. In contrast, the BTC as a store of value and hedge against the inflation narrative has been weakening and might keep on this track as “The Merge” approaches.