The ETH market capitalization already accounts for 54% of the Bitcoin cap, compared to 15% at the end of 2020

Most traders have noticed that the price of Ether has exceeded Bitcoin for months, the ETH / BTC rate rose more than 230% in 2021, and recently hit an all-time high (ATH). 0.089 BTC is new on December 9th.

ETH / BTC price chart | Source: TradingView

In a word, Ether’s $ 490 billion market cap now accounts for 54% of Bitcoin’s total $ 903 billion market cap. At the end of 2020 this rate is only 15%, so that it can be concluded that part of the “flipping” took place. It may still be a long way from what Ethereum maximalists envision, but it’s still respectable growth.

Instead of analyzing logical reasons for this or predicting outcomes based on unfounded expectations, analysts should examine the market structure of individual coins.

For example, do the futures market premiums for both Bitcoin and Ethereum see a similar trend, and what is the long-to-short ratio of professional traders? These are the most suitable indicators for determining if the movement has enough strength to continue.

Futures Premium in favor of Ether

Quarterly futures contracts are the preferred tool of whales and arbitrage tables, but because of their settlement dates and the spread over the cash market, they can seem complicated to retailers. However, the most notable benefit of these quarterly contracts is that there is no fluctuating funding rate.

This fixed monthly futures contract usually trades slightly above the spot market price, suggesting that sellers are charging more money in order to delay payments longer. Therefore, futures should be traded in healthy markets at an annual premium of 5 to 15%. This situation is known as “contango” and is not limited to the crypto market only.

Based on Bitcoin vs. Ether futures | Source: Laevitas.ch

After comparing the two charts, it can be seen that Bitcoin futures are trading at an average annual premium of 2.6% for March 2022 and 4.4% for June 2022, versus 2.9% and 5%, respectively, for Ether. Hence, it is clear that whales and arbitrage tables are charging a higher premium for ether, and this is a bullish indicator.

Bitcoin’s long-to-short ratio is falling

To measure how positioned professional traders are, investors should monitor long-to-short ratios on the best crypto exchanges. This metric provides a broader view of traders’ effective net positions by collecting data from multiple markets.

It should be noted that exchanges collect data about professional traders in different ways as there are several ways to measure client net exposure. Therefore, any comparison between different providers should be based on a percentage change and not an absolute number.

Long-to-short ratio of professional bitcoin traders | Source: Coinglass

The long-to-short ratio for professional Bitcoin traders currently averages 1.21, up from 1.39 on December 5th. Compared to 1.59 two weeks ago, this suggests that buyers (long orders) have reduced their exposure by 24%. Here, too, the absolute number is of less importance than the total change.

Long-to-short ratio of professional ether traders | Source: Coinglass

Meanwhile, ether whales and arbitrage desks have shown a positive change in sentiment since December 5th, after the long-to-short move rose from 1 to 1.16. Comparing the average data from November 25th, the long-to-short ratio of professional ether traders was reduced by 20% from 1.43.

Data shows that ether traders are more confident than bitcoin traders

The latest data on the derivatives market favor Ether, as it currently has a higher futures base rate. Additionally, the improvement in the long-to-short ratios of professional traders since October 5th signals confidence in a fragile period with Ether price falling 16% from an ATH of $ 4,870.

Bitcoin investors may lack confidence as the price is 31% below its ATH of $ 69,000 on Nov 10. There is no way of telling whether this is a cause or an effect. However, based on the futures premium and long-to-short ratio data, Ether appears to have enough momentum to continue to outperform.

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Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.

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