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Tuesday, April 23, 2024

Ethereum becomes more popular than Bitcoin: Analyst says

Investments in Ethereum are becoming more popular than in Bitcoin. Why does this happen?

Ethereum futures are becoming even more popular than similar Bitcoin trading tools – experts at banking giant JPMorgan have come to this conclusion. Bank officials noted in their recent interview that this month, Bitcoin futures on the Chicago Mercantile Exchange were trading below the market price of the cryptocurrency itself. All of this makes Ethereum more attractive to large investors. 

We talk about the situation in more detail.

Recall that the futures contract is a contract that guarantees that the buyer acquires the asset at a certain time and in a specified volume. The crypto sphere often uses futures contracts with no expiration date. Now, the volume of open positions in futures contracts is greater than that of the spot market, where traders sell and buy crypto assets at market prices, i.e. without speculation on future value.

Can Ethereum outperform Bitcoin?

Bitcoin and Ethereum are the most popular digital assets for futures contracts because trading in these cryptocurrencies has the highest volume and liquidity. The popularity of futures contracts is due to the possibility of opening positions in an asset through leverage, i.e. to sell / buy an asset on funds borrowed by the exchange under one’s own guarantee.

According to Decrypt, the increased interest in Ethereum derivatives indicates “healthier demand for altcoin compared to the same indicator for Bitcoin.” A special role is played by institutional investors – large organizations that may soon start to invest a lot of capital in the Ethereum futures market.

Besides, it is easy to determine the demand ratio of trading instruments: as a general rule, the greater the positive difference between the futures price and the price of the underlying asset, the more popular the derivative. . For example, if Bitcoin futures have been trading below the coin’s market price all month, Ethereum derivatives, on the contrary, are on average 1% higher than the value of Ethereum in September.

At the same time, analysts have established that the reserves of Ethereum crypto exchange platforms have fallen to 18.533 million Ethereum. Remember that this figure hovered around 23.92 million Ethereum almost a year ago. During the same time period, the price of altcoin was only $ 349, which means that the reduction in reserves can serve as a trigger for the growth in the value of the asset.

The logic is simple – the reduction in reserves of the exchange platforms speaks of the massive withdrawal of coins from the markets. This is all because customers are putting Ethereum on cold wallets for long-term storage, reducing the pressure on the seller’s market. The stronger this trend, the faster the Ethereum rate will increase in the future. Despite the recent collapse of the crypto market, this fundamental factor indicates the willingness of investors to keep the currency even in the most negative scenario for all cryptocurrencies.

At the same time, Gary Gensler, head of the United States Securities and Exchange Commission, can create problems for the cryptocurrency market. It will seek to regulate the entire digital asset industry – such a statement was made by billionaire and founder of Galaxy Digital investment fund Mike Novogratz.

In his recent statement in an interview with the Washington Post, Gensler referred to cryptocurrencies as “speculative assets,” whose fundamental value is based on investor expectations. Overall, since his appointment to the post in April this year the head of the SEC has made it clear that the crypto sphere expects fairly strict regulation.

This week, at the Messari Mainnet conference, Novogratz addressed the delicate subject of cryptocurrency control. Here is a quote from the expert: 

“Gary is smart, there’s no question he’s very smart. Also, no one doubts that he wants to regulate crypto, insinuating this transparently. He wants to be his sheriff. “

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In other words, Gensler expects the SEC to have enough leverage on the development of Bitcoin and the entire popular altcoin ecosystem as a whole. In his recent remark on issues with the exchange platform Coinbase, he said that many digital assets have characteristics of securities, so the crypto industry needs the protection of ordinary investors.

We believe that the current situation in the futures market is in any case having a good effect on the crypto field as a whole. Regardless of investor preference for premium currencies, whatever happens is helping to popularize digital assets. Therefore, the leadership of Bitcoin in these conditions is not essential.

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