Ethereum has underperformed its bigger brother Bitcoin since the start of the year, but is poised to make a comeback against it this month, according to K33 Research.
Meanwhile, a major smart contract platform is set to accept the first U.S.-listed spot exchange-traded fund (ETF) in July, sparking a new wave of institutional demand for ETH, while Bitcoin holders await the distribution of 141,686 BTC ($8.8 billion) from defunct Bitcoin exchange Mt. Gox, a potential tsunami of selling pressure the longest in a decade.
“The bad behavior of 2014 has paid off,” K33 Research said in a market update on Tuesday. “In the dry summer market, we expect Bitcoin to bear the brunt of net selling pressure, widening chop suey's price range until brighter days arrive and the leaves turn orange.”
While the cryptocurrency market has lost a lot of bullish momentum since April, K33 claims that the Ethereum ETF will absorb 0.75% to 1% of all ETH in circulation within its first five months on the market. While the launch of the ETF could trigger a “news sell” event for ETH in the short term (like the Bitcoin ETF did in January), the firm says ETH's “positive supply trends” will drive “relative strength” over the coming months.
“As the summer progresses and inflows increase, ETFs will be a powerful catalyst for relative ETH strength,” continued Vetle Lunde, senior analyst at K33, “and I believe the current ETH/BTC price represents a bargain for patient traders.”
The ETH/BTC ratio steadily declined from 0.056 to 0.046 by May 24th following the launch of the Bitcoin ETF. That's when the surprise news came that the SEC would soon approve an Ethereum ETF, and the ratio has climbed back up to 0.055 today.
Indicators suggest that positive sentiment towards both ETH and BTC is returning, especially in the futures market.
According to the report, Chicago Mercantile Exchange (CME) Bitcoin futures premium is back in double digits at 10.9%. As for Ethereum, the newly launched VolatilityShares 2x Leveraged ETH ETF has gained 33,700 ETH ($114 million) worth of exposure in just 15 trading days, indicating that CME traders are now seeking long leveraged exposure to ETH.
The popularity of the new ETF has pushed CME ETH open interest back to all-time highs, currently standing at 372,000 ETH ($1.26 billion). K33 Research says such high interest indicates intent to conduct directional trades around ETH before the ETF goes live, although the direction of those trades remains unclear.
“The soft funding rate suggests that directional expectations are balanced, with neither bulls nor bears dominating. This highlights the uncertain market outlook and lack of consensus as the ETH ETF launch approaches,” the report concluded.
Editor: Ryan Ozawa.
