Ethereum’s price increased by 274% in 2021, a huge difference from Bitcoin’s price increase. But the month of October, if viewed alone, indicates that Bitcoin is performing better than Ethereum.
Why, you ask?
This is because Bitcoin increased by 13% in October, better than Eth.
For short-sighted investors, the price increase is worrying and something to be jittery about.
But that is not true for professional investors. They know how wise it is to look at the long-term gains.
However, despite this optimism among Ethereum traders, there are traders who are worried that Ethereum will not move to Proof of Stake (PoS) fast enough. Right now, Ethereum uses Proof of work, which is a consensus mechanism used to prove the integrity of a transaction on the blockchain.
The gas fees for Ethereum are high because Ethereum still uses proof of work. Plus, given the rate at which other networks such as Solana are growing, there is a need for Ethereum enthusiasts to worry about eth coins.
But the future of Ethereum’s price is not as gloomy as some naysayers and unbelievers would want many to believe. If anything, Ethereum’s future looks secure.
Speculation over Announcement of Bitcoin Exchange Traded Fund
One positive news in the cryptocurrency space is the speculation that the American Security and Exchange Commissions (SEC) will soon announce the bitcoin ETF. The optimism has seeped into the market’s behavior as many investors are predicting a price increase in the coming months, if bitcoin ETF is eventually announced.
Although these are mere speculations, with the SEC having a penchant for delaying announcements such this, there is general feel-good feeling among traders and investors on the possibility of Ethereum hitting an all-time-high.
So, what does a bitcoin ETF mean and why is it causing so much excitement?
Before delving into what bitcoin ETF means, let’s explain what an EFT is.
An ETF is an investment vehicle that tracks how well an asset is doing, usually the price of the asset. With an ETF, investors do not need to own the asset itself; they own a derivative of the asset. An ETFis a safe way for people to get in on the pie of a good asset without really buying the asset. It is called a derivative because it is like getting an orange juice without getting an orange; the orange juice is the derivative of an orange.
What then is a bitcoin ETF?
A bitcoin ETF is an investment vehicle that tracks the price and performance of bitcoin.
The advantages of bitcoin ETF are that it allows investors to invest in bitcoin without actually owning it, and the risk factor involved with the ETF is low.
Also, with bitcoin ETF, investors reduce risk of owning bitcoin, and having to deal with Redot Crypto exchange and other exchange platforms. Investors in bitcoin ETF also don’t worry their head over storage and security issues that bitcoin hodlers and investors worry about.
Recent Price Stagnation Is not Fazing Professional Traders
Although the price of Ethereum has stagnated for a while, especially when compared to bitcoin, professional investors are not rushing to Redot.com or any exchange platforms to sell their Ethereum. There are no panic sells.
Having analyzed the futures premium, we see that investors are confident that Ethereum’s price will soon surge.
So, what is a futures premium?
A futures premium is the difference between the price of a coin in the futures market and the price in the spot market.
The futures market allows investors and traders to measure the market’s sentiment and predict the next move of a coin. If traders feel like a coin’s price will increase, they go for Long buy, and if they feel it will reduce, go for Short Sell.
A closer look at eth quarterly, a futures contract type loved by whales because there is a specified time, and the rewards are often higher than spot trading, shows that there is some level of calm and optimism, although the optimism is measured, in the Ethereum market.
The futures premium on Ethereum, data have shown, has been below 13%, which is a good one.
A neutral quarterly futures premium is between 5% and 15%. So, with a 13% futures premium, it shows that investors are not selling and are not rushing into the market to buy; no FOMO.
And this is a good thing for Ethereum traders.
With a neutral eth market, investors are more likely to respond to price swings more calmly than in a market fueled by greed or fear.
Calm and confidence of eth traders and investors is paying out as the price of Ethereum, as at the time of this article, was $4,200 in the spot market.
Retail Traders Are not Scared
Retail traders are different from whales on the type of futures contract they like. While whales that prefer quarterly contracts, retail traders, on the other hand, prefer perpetual futures contracts – a futures contract with no expiry date, one that can run for as long as possible to stay in the market.
Retail traders are not doing any panic buys or greed sales. The confidence of these traders can be clearly seen in the futures market funding rate.
Funding rates are the periodic payments given to long or short traders, which is calculated by subtracting the price of a coin on the spot market from its price on the futures market. Funding rates are the representation of traders’ sentiments on which position/direction the price will go.
A negative funding rate means that traders are bearish, betting on shorts that the price will fall, while positive funding rates show that traders are betting on the price to increase.
In the past one month, since September 7, the market has not shown any real sign of bearish or bullish sentiments. The funding rate has flirted between 0% to 0.03% in the past month.
The neutrality in the market is a great sign for new and old investors because with a neutral market, traders and investors can expect to benefit from a price surge. And if the bitcoin ETF announcement comes to fruition, then an all-time-high for Ethereum is not so far away.
While traders are optimistic, they’re tampering their optimism with realism: yes, bitcoin’s price increased better than Ethereum in October, still, the value of Ethereum has been more stable over the course of the year, with low swings not as devastating as bitcoin’s swings.