A research firm advises its clients to hedge their bullish Bitcoin Positioning by taking short positions in Ether The native token of the Ethereum blockchain, aside from widely optimistic forecasts for a year-end ETH rally.
“Our altcoin model continues to favor short ETH vs. long BTC,” Marcus Thielen, founder of 10x Research, said in a client note on Friday.
Shorting Ether could be a good hedge primarily because the outlook for the ETH Digital Asset Treasury (DAT) looks relatively weak.
Thielen noted that issuance of new shares by Bitcoin Immersion Technologies, a major ether buyer this year, has slowed since September as retail demand has declined significantly. With limited options to raise additional capital, Bitcoin’s ability to purchase more ETH is now constrained.
As a result, “if Bitcoin is exploited, Ethereum will benefit as well, at least for now,” Thielen said.
He cited the anti-Ether bias in Deribit-listed options as another sign of investors’ dislike for Ether. According to Per Thielen, traders are increasingly buying put options on Ether, indicating growing downside concerns. In contrast, Bitcoin options open interest has reached a record high of more than $50 billion, driven primarily by demand for upside exposure through calls.
Finally, data from Google searches indicates a shrinking pool of incremental Ether buyers, making it vulnerable to price weakness, he argued.
Overall, these factors suggest that Ether could suffer a major blow 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 out of its triangle,” Thielen said.
At the time of writing, Ether is down more than 3% in 24 hours to $3,815. Bitcoin traded nearly 2% lower at $108,820, according to CoinDesk data.