Analysts have observed a shift in capital flows from bitcoin to ether, with the derivatives market indicating that investors expect further near-term upward momentum for the second-largest digital asset by market cap.
Open interest in ether surged over the weekend, accompanied by increased implied volatility and a pronounced demand for call options, signaling growing confidence among derivatives traders.
In the past 24 hours, ether has gained over 6%, trading above $3,513, while bitcoin has seen a modest decline of 0.5%, now priced at approximately $95,600, according to The Block’s Prices Page.
“Flows over the last few sessions have swung in favour of ether, as open interest on exchanges pushed to all-time-highs over the weekend,” Wintermute analysts noted in their weekly crypto market update.
Ether derivatives show strong demand
The pivot from bitcoin to ether has been characterized by a sharp rise in implied volatility for ether and a 12-month high in the put-call skew, indicating a strong preference for upside exposure. According to Wintermute analysts, traders are aggressively driving the market higher through topside buying.
“Large blocks over the weekend included ether December 27 call spreads, with strike prices ranging from $3,600 to $5,000,” Wintermute reported. Analysts added that the notable 8–10-point premium in near-dated ether call contracts could attract hedging activity via 10–25-day risk reversals.
This bullish momentum in ether has also sparked over-the-counter (OTC) demand for ERC20 tokens, with the Pepe memecoin emerging as a standout beneficiary. The price of Pepe has gained over 54% in the past fortnight. “Pepe continues to see strong bids, especially in Layer 2 ecosystems, as ether’s rally boosts interest in altcoins,” Wintermute said.
QCP Capital analysts echoed the observations made by Wintermute Trading, observing a steady rotation of capital flows from bitcoin into ether and other altcoins over the past 24 hours. “The market appears to expect bitcoin to trade sideways until December, with attention shifting to ether in the near term,” QCP analysts said.
In derivatives markets, ether risk reversals remain heavily skewed in favor of near-term call options, while bitcoin calls show stronger interest for contracts expiring after December 27, 2024, the QCP Capital analysts said. This delay is attributed to traders anticipating pro-crypto policies from President-elect Donald Trump, which are expected to take effect following his inauguration on January 20 next year.
Despite strong spot ETF inflows and positive sentiment around bitcoin, a $100,000 sell wall has slowed its ascent. QCP analysts highlighted that bitcoin dominance has dropped from 62% to 59% over the past week, suggesting a gradual shift toward Ether and altcoins.
“Bitcoin’s failure to decisively break $100,000 could accelerate this rotation into ether and other assets,” QCP analysts added. However, they noted that a potential catalyst, such as another large purchase by MicroStrategy, could reignite bitcoin’s momentum and temporarily shift attention away from altcoins.
Disclaimer: Evgeny Gaevoy, the founder and CEO of Wintermute, previously sat on The Block’s board of directors from April 2023 to early November 2023 and remains a minority shareholder.
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