Ether-Bitcoin Ratio Uptick Fails to Inspire Bullish Positioning in ETH Options

Options skew remains in favor of ether puts across different timeframes despite the past week's increase in the ETH/BTC ratio.

AccessTimeIconAug 23, 2023 at 10:50 a.m. UTC
  • Ether puts expiring in both the short and long terms continue to trade at a premium relative to calls, indicating persistent speculation of a price decline.
  • Bitcoin options are maintaining a long-term bullish bias.

The ether-bitcoin (ETH/BTC) ratio rose more than 2% last week, contrasting with its record of taking losses during bouts of risk aversion.

Still, options data tracked by Amberdata show a stronger bearish outlook for ether, with traders hedging against potential price weakness over the one-week, one-, two-, three- and six-month timeframes. Meanwhile, traders remain bullish on bitcoin over the long run.

The short-term and long-term ether call-put skews, which measure the implied volatility premium for calls relative to puts, hovered well below zero at press time. That's a sign of relatively higher prices for puts, the options used to protect against price drops.

Negative values indicate a bias for put options. (Amberdata)
Negative values indicate a bias for put options. (Amberdata) (Amberdata)

Puts are derivative contracts that give the purchaser the right, but not the obligation, to sell the underlying asset at a predetermined price on or before a specific date. A put buyer is implicitly bearish on the market, while a call buyer is bullish.

In bitcoin's case, the one-week, one- and two-month skews show a bias for puts, while the rest show preference for calls.

Positive values show a bias for call options. (Amberdata)
Positive values show a bias for call options. (Amberdata) (Amberdata)

The persistent bias for long-term BTC calls perhaps stems from the belief that the top cryptocurrency would be the first beneficiary of an eventual positive flip in the macroeconomic environment.

"BTC continues to be 'the' macro asset for the crypto market and could also see some strong inflows as the macro environment shifts," Noelle Acheson, author of the popular Crypto Is Macro Now newsletter, said. "Many large investors will continue to prefer BTC exposure for its liquidity, market cap, and relative stability. So, we could see some ETH outperformance on the ETF narrative, but BTC could again outperform once macro investor funds start to take crypto positions."

Besides, bitcoin is set to undergo its fourth mining reward halving early next year. Historically, the programmed halving of the pace of supply expansion has paved the way for major bull runs.

Both bitcoin and ether took a beating last week, with the former falling over 10% while the latter lost around 8%, CoinDesk data show. Analysts attributed ether's outperformance to several factors, including expectations for a launch of ETH futures-based exchange-traded funds and hedging activity of market makers.

Edited by Sheldon Reback.


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Omkar Godbole

Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.