Why traders are betting against Bitcoin ahead of Ethereum ETF launch

Traders are “aggressively” buying up Ether call options ahead of the launch of spot Ethereum exchange-traded funds — and they’re using Bitcoin as a hedge.

That’s according to a Monday report by crypto market maker Wintermute.

The reason? The new ETFs are expected to push the price of the world’s second largest cryptocurrency while several factors risk driving Bitcoin’s price lower.

Ethereum strength

Anticipation of the imminent launch of spot Ethereum ETFs is showing up in options data.

Simply put, options give traders the right to buy or sell a given asset — say, Ether — at a specified price at some point in the future.

Even though Bitcoin volatility has reached a six-month low — creating an environment that is “notoriously difficult to trade” — options traders are expecting Ether to experience a large upside move soon, according to Wintermute.

Bitcoin, meanwhile, keeps suffering from negative headlines and supply risks.

Crypto exchange Mt. Gox could soon begin repaying its creditors — meaning $9.2 billion worth of Bitcoin could soon hit the market.

The German and US governments, meanwhile, are expected to start selling seized Bitcoin on the open market.

The situation has made “long Ethereum, short Bitcoin the new consensus trade leading up to spot ETF approvals,” Wintermute said.

But that’s only for the short term.

Traders still expect Bitcoin to hit $100,000 before the end of the year — possibly as early as September, Wintermute said.

When will volatility come back? Well, it could be as soon as July 4. The US holiday, sandwiched in between “key data releases” — namely a speech from Federal Reserve chair Jerome Powell on Wednesday and a jobs data report on Friday — could see heightened volatility and lower trading volumes, the firm said.

Not to mention that spot Ethereum ETFs could launch any day now, according to Bloomberg ETF analyst Eric Balchunas, though he said it would probably happen after Independence Day.

Crypto market movers

• Bitcoin is down 0.8% in the last 24 hours, trading for $62,400.
• Ethereum has slumped 0.9% in the same period, now at $3,410.

What we are reading

• Core Scientific CEO on how AI sales will help outpace Bitcoin mining — DL News.
• Sony Ventures Into Crypto Realm With Potential Exchange Relaunch — Milk Road.
• Grayscale’s Solana Trust Continues to Trade at a High Premium After 2 Spot SOL ETF Filings — Unchained.
• Best OTC Crypto Exchanges July 2024 — Milk Road.
• Why crypto is shortsighted in celebrating Supreme Court’s seismic Chevron ruling — DL News.

Tom Carreras is a markets correspondent for DL News. Got a tip about options trading? Reach out at tcarreras@dlnews.com.