Ethereum trends show that it becomes more valuable as ETH 2.0 gets closer. Institutional investors are therefore asking to get involved before it’s too late. One signal for this was that ETH futures were being traded at a higher base premium than BTC futures on the CME. In the past three months, ETH futures have been traded continuously on a higher rolling basis than BTC futures. This could show that institutional investors are more optimistic about the future of ETH compared to BTC. But other factors have also led to the ETH futures trading so high.
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ETH futures on CME have only been live since February. This means that the market has not yet had time to adjust to market conditions. In the case of BTC futures, however, investors have been trading on the CME for four years. So the market had more time to get used to the market conditions surrounding BTC futures, along with established setups to leverage cash and carry trades in the most efficient way possible.
ETH futures basis higher than BTC futures basis | Source: CME Crypto Futures 3-month rolling basis from Arcane Research
The fact that ETH Futures is only six months old hasn’t given the market much time to establish the same patterns with BTC futures. ETH futures are still developing and investors are trading a mature one that is not yet ripe. But this has started to change.
Institutional investors need more ETH commitment
ETH Futures saw high base premiums when it was launched, which was most likely due to institutional investors using ETH Futures on CME to get more exposure to ETH. However, over time, the ETH futures market has continued to develop. The basis of ETH Futures showed a downward trend as more and more trading companies use the CME to carry out cash and carry trades. Following the same trend on a BTC basis.
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Over time, however, this contango has grown from its lows. A spike caused the BTC base to skyrocket before eventually stabilizing at around 3%. While the ETH base saw an even higher increase, which eventually stabilized at 7%. ETH futures remained in the uptrend in the weeks after rising to the current position.
This higher increase in the ETH base than the BTC base shows that institutional investors are currently more optimistic about Ethereum compared to Bitcoin. Base trends between the two futures put Ethereum on a higher trajectory than its Bitcoin counterpart.
Ethereum’s institutional interest in price movements
The CME ETH Futures are not the only indication that institutional investors are showing more interest in Ethereum. Price movements in ETH also indicate greater interest in the asset versus the pioneering cryptocurrency Bitcoin.
The price of ETH has increased by 240% in 2021 alone | Source: ETHUSD on TradingView.com
The price of ETH has exceeded the price of Bitcoin by over 200% this year. While the performance of Bitcoin for the year 2021 is less than 38%, the performance of ETH has increased by 240%. This difference in performance shows that investors are moving more towards Ethereum. This leads to the high price growth compared to BTC.
The Ethereum network is further expanding its use cases with the upgrade to ETH 2.0. It is the leading network for DeFi and NFT development. Its TPS is higher than Bitcoin’s, and switching to Proof of Stake will reduce the network’s energy consumption by 99%.
Featured image from The Cryptonomist, charts from Arcane Research and TradingView.com