Ethereum will perform better than Bitcoin post-ETF launch

Ethereum is going to outshine Bitcoin once the spot ETFs for ETH launch, according to a report by Kaiko. The crypto market has seen some big changes since the SEC gave the green light to Ethereum ETFs back in May. 

Although Ethereum’s price has dropped nearly 20% over the past two months, there’s more to the story. Under the surface, Kaiko said Ethereum looks primed for a huge boost the second these ETFs start trading.

The ETH to BTC ratio, which shows how Ethereum stacks up against Bitcoin, is still high around 0.05. This is a solid sign that Ethereum could outperform Bitcoin after the ETFs go live. Before the approval, this ratio was around 0.045.

Liquidity conditions for Ethereum have stayed solid. Even though trading volumes typically dip during the summer, Ethereum’s 1% market depth has been steady around $230 million since the approval.

This is up from early May when it fell below $200 million. Meanwhile, the spot markets for Ethereum have stayed tough despite the 20% drop in prices.

Perpetual futures, however, have cooled down faster. Funding rates have dropped by half since May, showing that traders are less confident and not as willing to pay high rates to keep their long positions. 

Open interest, which was around $11 billion after the approval, has also fallen. This drop in funding rates and open interest is likely tied to uncertainty about when the ETFs will actually launch.

Kaiko noticed that implied volatility (IV) on near-term options contracts shot up over the past week. Deribit ETH options expiring on July 19 and 26 saw the biggest changes.

It jumped to 62% on Monday from 53% on Saturday, rising above the longer-dated July 26 contract. This means that traders are willing to pay more to hedge their bets and protect against sharp price moves in the short term.

Crypto traders are also placing bets on the US presidential election using PolitiFi tokens, which have gained popularity this year. These tokens, designed to speculate on election-driven hype, have surged in value. Particularly those linked to former President Donald Trump. 

The MAGA token, for instance, jumped 51% in two hours after news about Trump’s shooting on Saturday, though it lost some gains the next day. This surge was mirrored by an increase in shares of Trump’s Media Technology Group.

Matthew Sigel, head of crypto research at VanEck, has said that the company’s Solana (SOL) ETF filing is also a bet on the presidential election. The SEC has until March 2025 to respond to VanEck’s SOL ETF filing, not leaving much time for a new administration to be appointed if President Biden loses. 

In 2024, several companies followed the lead of MicroStrategy and Tesla by allocating parts of their balance sheets to Bitcoin. This change was driven by Bitcoin’s growing appeal as a treasury asset, mainly due to regulatory factors. The decisions had odd results. MicroStrategy made huge profits, while others had minimal impact.

Additionally, Kaiko said the approval of spot ETFs in the US and promotional campaigns led by major asset managers like BlackRock and Fidelity have greatly increased public awareness about Bitcoin, likely amplifying the announcement effect.