A research firm has advised its clients to hedge their bullish bitcoin positions by taking short positions in ether the native token of the Ethereum blockchain, deviating from the generally optimistic forecasts for an ETH rally by the end of the year.
“Our altcoin model continues to favor short ETH versus long BTC,” Markus Thielen, founder of 10x Research, said in a client note on Friday.
Shorting ether can be a good hedge, primarily because the ETH outlook for the digital asset treasury (DAT) looks relatively weak.
Thielen explained that the issuance of new shares by Bitmine Immersion Technologies, a major ether buyer this year, has slowed since September as retail demand has fallen significantly. With limited opportunities to raise additional capital, Bitmine’s capacity to purchase more ETH is now limited.
As a result, “if Bitmine is tapped out, so is Ethereum’s upside, at least for now,” Thielen said.
He noted the anti-ether bias in the Deribit-listed options as another sign of investor aversion to ether. According to Per Thielen, traders are increasingly buying put options on ether, signaling growing concerns about downside conditions. In contrast, bitcoin’s options open interest has risen to a record high of over $50 billion, driven primarily by demand for upside exposure via calls.
Finally, data from Google searches indicates a shrinking pool of incremental Ether buyers, making it vulnerable to price weakness, he argued.
Taken together, these factors suggest that ether could take a bigger hit if bitcoin breaks out of its multi-month sideways trading pattern above $100,000.
“A straightforward long-BTC/short-ETH position remains attractive in this environment and should continue to provide protection — even if Bitcoin eventually breaks its triangle to the downside,” Thielen noted.
At the time of writing, ether changed hands at $3,815, down over 3% in 24 hours. Bitcoin is trading at $108,820, down nearly 2%, according to CoinDesk data.
