Research firm advised clients to hedge their bullish bitcoin positions by taking short positions on ether the native token of the Ethereum blockchain, deviating from largely optimistic predictions of a year-end ETH rally.
“Our altcoin model continues to favor short ETH over long BTC,” Markus Thielen, founder of 10x Research, said in a client note on Friday.
Shorting ether could be a good hedge, mainly because ETH’s digital asset treasury (DAT) outlook appears relatively weak.
Thielen explained that the issuance of new shares by Bitmine Immersion Technologies, a major buyer of ether this year, has slowed since September as retail demand has declined significantly. With limited options to raise additional capital, Bitmine’s ability to purchase more ETH is now limited.
As a result, “if Bitmine is leveraged, so will the benefits of Ethereum, at least for now,” Thielen said.
He noted the anti-ether bias in options listed on Deribit as another sign of investors’ aversion to ether. According to Per Thielen, traders are increasingly buying ether put options, signaling growing bearish concerns. In contrast, open interest in Bitcoin options reached an all-time high of over $50 billion, driven primarily by demand for upside exposure via calls.
Finally, Google search data indicates a decrease in the number of additional buyers of Ether, making it vulnerable to weak prices, he argued.
Taken together, these factors suggest that ether could be hit harder in case Bitcoin breaks out of its months-long sideways trading pattern above $100,000.
“A simple long BTC/short ETH positioning remains attractive in this environment and should continue to provide protection, even if Bitcoin eventually breaks its downward triangle,” Thielen noted.
At the time of writing, ether changed hands at $3,815, down more than 3% in 24 hours. Bitcoin is trading at $108,820, down nearly 2%, according to CoinDesk data.
