A research firm has advised its clients to hedge their bullish bitcoins. positions taking short positions in ether the native token of the Ethereum blockchain, diverging from widely optimistic forecasts of an ETH rally by the end of the year.
“Our altcoin model continues to favor short ETH over long BTC,” Markus Thielen, founder of 10x Research, said in a client note on Friday.
Shorting ether could be a good hedge mainly because the prospects for the ETH digital asset treasury (DAT) appear relatively weak.
Thielen explained that the issuance of new shares by Bitmine Immersion Technologies, a major buyer of ether this year, has slowed since September as retail demand has decreased significantly. With limited options to raise additional capital, Bitmine’s ability to purchase more ETH is now limited.
As a result, “if Bitmine runs out, so does Ethereum’s advantage, at least for now,” Thielen said.
He pointed to the anti-ether bias in options listed on Deribit as another sign of investors’ aversion to ether. According to Per Thielen, traders are increasingly buying puts on ether, indicating growing bearish concerns. In contrast, bitcoin options open interest has risen to a record level of over $50 billion, driven primarily by demand for upside exposure through call options.
Lastly, he argued that Google search data indicates a shrinking pool of incremental buyers of Ether, making it vulnerable to price weakness.
Together, these factors suggest that ether could take a bigger hit should bitcoin break its multi-month sideways trading pattern above $100,000.
“A simple long BTC/short ETH positioning remains attractive in this environment and should continue to provide protection even if Bitcoin eventually breaks its bearish triangle,” Thielen noted.
At the time of writing, ether changed hands at $3,815, a drop of more than 3% in 24 hours. Bitcoin was trading at $108,820, a drop of almost 2%, according to data from CoinDesk.
