BlackRock (BLK) CEO Larry Fink recently said, “IBIT is the fastest-growing ETF in the history of ETFs.'' declared He said in an interview with Fox Business. The SEC’s approval of the Spot Bitcoin ETF in January and its subsequent performance has propelled BTC and the broader crypto market to new heights.
First, Bitcoin itself hit a new “all-time high” in price, exceeding $70,000. The US-based Bitcoin CME futures contract has surpassed the open interest of all other exchanges, including Binance, making it the largest BTC derivatives exchange. And ultimately, the forward basis exceeded 25% per year, almost five times the US risk-free rate.
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Where does that leave us today?
Bitcoin has another major fundamental milestone that keeps traders and investors excited about rising prices, and that is the Bitcoin halving. Scheduled to occur around April 20th (a perfect meme, of course), the Bitcoin block issuance rate will drop from 6.25 coins to 3.125 coins per block.
Although the sample size is small, in past years during Bitcoin's halving, its performance from January to December averaged about 200%. This means that the year-end price of BTC will be around $91,500.
That said, from a derivatives trading perspective, the predictability and certainty of a halving is different from the uncertainty of the SEC's spot ETF decision and subsequent ETF adoption. This means that traders are less likely to be surprised by completely known events. Given this understanding, using Bitcoin derivatives as a contrast to Ethereum tells a story about potential rotation opportunities post-halving.
Looking at the April 26th option expiry (top) and June 28th option expiration (bottom) clearly shows the dynamics that are priced into both Bitcoin and Ethereum options. First, for April 26th, the call wing's Bitcoin options are priced significantly higher than his Ethereum call wings, but his Ethereum put wings are priced at a premium over his BTC put wings. It is set.
The June 28th long-term options are stacked in a similar manner, showing that the close relationship between BTC and ETH is regular over the long term.
What this tells me is that while the current halving story is priced into short-term BTC options, there is a lack of optimism regarding Ethereum. Possibility of designation as “securities” Traders are bidding on Ethereum puts due to SEC approval and possible spot ETF disapproval in May.
Another thing I would like to point out is the difference in CME-driven positioning between BTC and ETH.
Looking at the top chart of BTC derivatives positioning, we see that CME futures (green) started in earnest in October on the back of enthusiasm for spot ETF approval. Today, CME BTC open interest looks small compared to other exchanges, including Binance.
Looking at Ethereum’s CME open interest, we see little increase while Binance continues to significantly outperform CME open interest. This shows that the US market has not yet started building positions in Ethereum. And whether they need to move to Ethereum spot ETFs in May or much later (after the initial rejection), buyers are still not flocking to Ethereum.
So why should you care about this opportunity to buy laggard Ethereum?
While the market is excited about the BTC halving slowing down the rate of issuance of coins in circulation, the ETH supply has already stopped growing (as clearly shown through options on 4/26). However, it has been actively decreasing since September 2022 due to the influence of EIP. -1559 Burns.
Ethereum has also just been successfully completed. Denkun upgradeL2 and L3 are starting to drive the growth of RWA, DeFi, and NFTs, along with the ability to build native “app chains” for high-throughput protocols that want to isolate activity within their own environments.
No one knows what the future will hold, and investing involves risk. But a general axiom that I like is: Are the fundamentals already priced in, or is the market underinvested in the potential opportunity?
In my opinion, after the halving, events in BTC can follow suit and instead of just “selling the news”, in this case, especially in the case of Ethereum, it can “rotate into alternatives”.
