Derivatives Traders: Higher interest on ETH than BTC

Key Takeaways

  • Derivatives markets recently have shown higher interest on ETH rather than BTC, as traders seem more willing to bet on the second-largest crypto.

  • Data also reveals that the current trend of ETH is more likely can sustain.

  • BTC derivatives traders seem to play safe rather than being speculative.


New money getting into ETH market

The changes of open interestare vital indicators to show if there’s new money getting into the market.Data from Skew shows that the aggregated open interest of ETH futures and swaps has been increasing steadily since mid-May, the number has reached the highest level in a month. An uptrend in open interest could also suggest that the existing market trend could be gaining momentum. Therefore it is likely to continue.

In contrast, BTC futures and swap open interest on OKEx has been somewhat maintaining at the current levels. While we don’t expect a sudden drop in the BTC OI in the short-term, a downward trend seems in the making. Although a lowering OI could only be part of the picture, though,the market appears relatively reluctant to bet on BTC prices at the moment.


Figure 1a: ETH Futures & Swap OI on OKEx(Source: Skew)


Figure 1b: BTC Futures & Swap OI on OKEx (Source: Skew)


ETH implied volatility steadies while BTC’s decreases

Implied volatility could provide a broader picture of the markets. We see that ETH’s IV has been recovered and relatively stable after the May 20 drop, that’s where ETHUSDT failed to secure 215 levels and retreated to 206 area.

On the other hand, the IV of BTC has been relatively fluctuating recently, especially bitcoin, which was again facing strong rejection at the 10000 levels.

OKEx Technical Weekly highlighted that major cryptos like BTC and ETH have failed to break key resistance levels (BTC: 10000; ETH: 220). Given that the first and second-largest crypto were both unable to break their crucial resistance levels, what the IV can tell us is that ETH seems comparativelyfavorable or, at least, more willing to be bet on by traders. Conversely, the lowering of the BTC’s IV could imply that traders may not be still unclear about the crypto’s short-term direction.


Figure 2a: ETH Implied Volatility (Source: Skew)


Figure 2b: BTC Implied Volatility (Source: Skew)


ETH swap basis positive, BTC’s in negative

The basis is the difference between the spot price and the futures price.Again, short-term demand and supply of the product are the main factors that could move the basis. A positive basis means traders were willing to pay a premiumto buy the futures. Likewise, a negative basis means the futures have been trading at a discount, which means the futures price is lower than the spot.

Data from Skew shows that the basis of the ETHUSD swap on OKEx has mainly been on the positive side, while the basis of the BTCUSD swap seems started to take a turn just recently. While the basis sometimes could fluctuate, traders should keep a close eye on the change of the basis.


Figure 3a: OKEx ETHUSD Swap –   Coinbase ETHUSD Basis (Source: Skew)


Figure 3b: OKEx BTCUSD Swap  – Coinbase BTCUSD Basis (Source: Skew)


Equal probability of breaking key resistances in June for ETH and BTC

Options markets data can always provide market colors for traders and investors to assess the approaches of other market participants, and the probability number could be an interesting one.

As we mentioned earlier in this article, both BTC and ETH have recently been rejected by their key resistance levels. Although the data above could indicate traders have been more willing to bet on ETH, however, options market shows that the probability of ETH being above 220 by the end of June is just about 28%, while the likelihood of BTC being above 10000 by the end of June is around 29%.

In other words, the options market seems to believe that there were only about 1/3 of the chances that the two leading cryptos will break the two mentioned key resistances by the end of June. It is worth noting that the probability numbers are constantly changing according to market conditions.


Figure 4a: Prob. of ETH above x$ per maturity.  (Source: Skew)


Figure 4b: Prob. Of BTC above x$ per maturity    (Source: Skew)


BTC Put/Call Ratio in 6-month high

We have been covering BTC’s put/call ratio before bitcoin halving. We believe that a rising put/call ratio indicates that options traders have been concentrating on hedging the downside risk of BTC prices, rather than setting up for speculative trades.

Since BTC has been hovering near the 9000 levels, the put/call ratio has surged to a level where BTC has touched 10000 in early May. That could indicate that options traders may not anticipate a BTC price rebound at current levels.


Figure 5: BTC Put/Call Ratio (Source: Skew)

This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involves significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.

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