Most large-cap cryptocurrencies, including bitcoin and ethereum, have failed to live up to expectations in the second half of 2024. Investors saw the broader market get off to a negative start last week, with most assets losing a significant portion of their value.
Interestingly, this recent price action has offered a unique insight into the current state of the cryptocurrency market and its relationship to macro capital markets.
bitcoin Spot ETF vs ethereum ETF: Relative Impact?
In a recent report, trading firm QCP Capital shared its observation on the bitcoin and ethereum markets following the significant drop on Monday, August 5. According to the firm, there has been a fundamental change in the liquidity profile of eth relative to btc, the largest cryptocurrency by market capitalization.
According to QCP Capital, bitcoin is increasingly being incorporated into major capital markets, including the stock and bond markets. On the other hand, ethereum, the second largest cryptocurrency, is being relegated to the background.
This shift in liquidity was further highlighted by the market-wide decline experienced on Monday, with btc falling by just 16% compared to eth’s 22% price drop. Moreover, bitcoin’s price is almost close to where it was a week ago, approaching $61,000, while eth’s price is still a bit behind.
QCP Capital noted that this trend appears to be a result of the “clear lack of interest” in recently launched ethereum exchange-traded funds (ETFs) relative to their btc counterparts. “btc as digital gold is a compelling narrative for investors, while eth lacks one,” the firm said.
This ethereum-spot-etf-experts-weigh-in-on-selling-point/” target=”_blank”>Lack of a point of sale Interest in ethereum, especially among older generations, was one of the talking points following the approval of the eth ETF. Interestingly, the slow start of these funds may lend some credibility to the initial concerns.
Liquidity shift not necessarily a bad thing, QCP says
According to QCP Capital, ethereum still has some growth potential despite not having penetrated traditional markets as strongly as bitcoin. The trading firm added:
As it is a more speculative and more volatile asset, the propensity for exponential price gains comes with the potential for larger declines.
QCP revealed that the difference in implied volatility between btc and eth was close to 5% before the launch of the ethereum spot ETFs. However, this difference has now grown to over 20% since the exchange-traded funds made their debut.
At the time of writing, ethereum is hovering around $2,600, while bitcoin appears to be holding above $61,000.
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