The cryptocurrency market has seen a shift in sentiment towards ether (ETH), the second-largest cryptocurrency by market cap, compared to bitcoin (BTC). Data from Deribit shows that it has become more expensive to use derivatives to insure against a decline in ETH than in BTC, indicating a growing concern about potential downside risks for ether.
This change in sentiment comes after weeks of big money favoring ether over bitcoin. According to data from Amberdata, ether’s 25-delta risk reversals for options expiring in August and September were trading at -2% to -7%. This means that put options, which provide protection against price drops, carry a 2% to 7% premium over call options, reflecting worries about a potential decline in the price of ether.
On the other hand, bitcoin’s short-term put options traded at a 1%-2.5% premium to calls, suggesting relatively restrained downside fears for the largest cryptocurrency by market cap.
A put option gives the purchaser the right to sell the underlying asset at a predetermined price on or before a specified future date. Put buyers are bearish on the market, seeking to hedge spot market holdings or profit from a price decline, while call buyers are bullish on the market.
The 25-delta risk reversal is an options strategy that involves a long put position and a short call option (or vice versa) with a 25% delta, meaning the strike price for both options is relatively far from the underlying asset’s market rate. Risk reversals are commonly used in the FX markets to gauge sentiment across different time frames.
Ether has seen a significant surge in July, with a 48% increase reaching a seven-month high of $3,941, outperforming bitcoin’s 8% gain by a wide margin. However, the rally lost momentum in the second half of the month due to concerns that it was driven solely by corporate adoption and lacked support from on-chain activity.
Currently, ether is trading at $3,600, down more than 6% in the last 24 hours, while bitcoin has lost 3% to $114,380, according to CoinDesk data. The market dynamics between these two leading cryptocurrencies continue to evolve, reflecting changing investor sentiment and market conditions.