Excell with Options: Trading the ETH/BTC Spread in a Year of Catalysts for Crypto Prices
Report highlights
Rich Excell examines a trade using the Ether/Bitcoin spread and whether or not the potential approval of an Ether-focused ETF will provide the same catalyst for prices that the wave of Bitcoin ETF approvals did earlier in 2024.
Image 1: Chart of generic front month Bitcoin and Ether futures, top lagged by four months and bottom with no lag
This year has been a very exciting year for cryptocurrency investors. First, with the approval of the well-rumored Bitcoin ETFs in January, the mainstream era of Bitcoin investing finally came to be. January was the catalyst for this followed by another halving event in April. Thus, bitcoin has had two big catalysts go in its favor. This has led to a move from $40K to the current $58K, a good year by all estimations. However, bitcoin is also well-off its highs for the year, as it touched close to $75K back in March before the halving. Thus, for those that went long for the halving catalyst, an event that had never seen the price go lower over a three-, six- or 12- month basis, are underwater. In fact, there have been some estimations that the average price accounts are long Bitcoin ETFs from is about $60K, suggesting the money that has flowed into the ETFs might also be underwater. Have these catalysts been what was expected? Were they so well-rumored that it was a buy-the-rumor and sell-the-news event? Now, traders and investors are beginning to speculate if ether will get the same bump in price as ETF listings are approved for Ether products. Some see a bump in price the same way bitcoin moved. The top chart shows the overlay of generic front month futures in both bitcoin and ether, with bitcoin leading by four months, trying to anticipate what a move in ether could look like. However, the bottom chart shows the two products with no lead/lag and we can see that both have moved in lockstep even though the catalysts this year have been almost entirely in bitcoin and not in ether.