The ratio of Ethereum to Bitcoin has reached new annual lows, but the emergence of an ETF based on futures for the second largest cryptocurrency by capitalization can reverse this trend. K33 Research experts came to these conclusions.
Analysts indicated that a downward trend formed in September 2022 during the passage of The Merge. Since then, relative to Bitcoin, the price of Ethereum has dropped from ~0.085 to 0.06.
“The steady decline throughout the year is due to reduced activity in the DeFi and NFT segments,” – the report says.
Kaiko analysts noted that Ethereum showed weakness not only in relation to Bitcoin, but also in relation to altcoins in general. Since the beginning of the year, this gap has only widened. The trend was accompanied by a decrease in trading volume of the second largest cryptocurrency by capitalization.
🚨#ETH trade volumes have been lackluster over the past year. As markets began rallying in January, #altcoins began to outpace ETH and the gap has continued to grow ever since. pic.twitter.com/0VGF089Px1— Kaiko (@KaikoData) September 26, 2023
Deutsche Digital Assets analysts in an interview with The Block explained the current weakness of Ethereum relative to Bitcoin by the resumption of net emission at 0.22% per annum amid a reduction in the burning of part of the commissions. The latter is typical for periods of low network activity.
The bearish sentiment towards Ethereum is also evident in the derivatives market. According to K33 Research, with open interest growing by 60% since August, backwardation in the second largest cryptocurrency by capitalization is more pronounced compared to digital gold.
Analysts saw this as a manifestation of skepticism among market participants regarding the approval of the Ethereum futures ETF and/or inflows of funds into this instrument. In their opinion, the market is mistaken about the prospects for SEC approval of the product. They are convinced that this could happen in mid-October and become an impetus for Ethereum purchases.
Earlier, Bloomberg senior stock analyst Eric Balchunas estimated a 90% probability of such a scenario occurring in early October.
“It looks like the SEC will potentially release several Ethereum futures ETFs next week.” – he said.
Looking like the SEC is gonna let a bunch #Ethereum futures ETFs go next week potentially https://t.co/YoBD1d1ay8— James Seyffart (@JSeyff) September 28, 2023
The Commission is currently considering 15 proposals to launch an exchange-traded fund based on futures for the second largest cryptocurrency by capitalization.
Grayscale Investments entered the race in September.
Let us remind you that the SEC recently postponed its decision on requests from 21Shares and VanEck to launch a spot ETF based on Ethereum.