Ether's returns historically lag behind bitcoin's in October, but analysts see signs that trend may get bucked

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The Block2024/09/30 16:00

By:The Block

Quick Take Ethereum tends to lag behind bitcoin in terms of price performance in October. However, analysts cite derivatives market indicators showing near-term optimism for the digital asset.

Historically, ether's average returns have fallen short of bitcoin's in October. However, analysts at QCP Capital have noted optimistic indicators suggesting that many derivatives traders believe ether has the potential to break its trend of underperformance.

"Historically, October is a strong month for bitcoin, with an average gain of 22.9% in eight out of the last nine years," analysts from QCP Capital noted. "Ether also tends to perform well, but its average return for October is approximately 5%," they added.

Despite the potential for the second-largest digital asset to lag behind bitcoin this month, there are signs of optimism for ether in the near term. "We observed a significant number of ether October call options being purchased this morning," QCP Capital said, pointing to derivatives market indicators. Looking at the current market structure, there are now over 63,600 ether call option contracts, with a notional value of $167 million, set to expire on Oct. 11. A further 26,200 call option contracts, with a value of $69 million, are set to expire on Oct, 18, according to data from Deribit.

The top trading volumes by expiry for ether options are calls for October 11 and October 18. Image: Deribit.

Ether call options with a $2,800 strike price, set to expire on Oct. 11, have experienced the highest trading volume over the past 24 hours, according to the Deribit data. Notably, both the Oct. 11 and Oct. 18 expiries show a significantly lower number of put options.

This disparity indicates a bullish sentiment among many traders, who appear to be betting that the price of ether will rise above the $2,800 mark by the expiration date. The increase in demand for these call options reflects growing near-term optimism for the digital asset in the derivatives market.

Top volume by instrument in ether options for the current day is October 11 call at the $2,800 strike price. Image: Deribit.

Ethereum's historical price trend in Q4

Bitfinex analysts highlight that, while ether typically sees solid returns in the fourth quarter of the year, the performance of the wider altcoin sector tends to be more varied. Historically, the first quarter is often the strongest for both ether and the wider altcoin market, with the second quarter occasionally delivering strong results as well.

However, the analysts further noted that the historical data for ether and altcoins is more limited than that for bitcoin."It is important to note that the data for ether and altcoin returns are quite dynamic and relatively small compared to bitcoin, as ether only started trading in the second quarter of 2016, and most altcoins in the top 100 by market capitalization were only created in the past three to four years," Bitfinex analysts told The Block.

Historical data of Ethereum ETH -0.71% 's price performance in the financial quarters of the year. Image: Coinglass.

Positive signs in the ether futures market

There are also indications of sustained optimism for ether in the futures market. Data from Coinglass highlights ether’s open interest-weighted funding rate has been trending positively since the broader risk asset sell-off triggered by the Bank of Japan's largely unexpected interest rate hike at the end of July.

Ether open interest-weighted funding rate has remained positive since mid-September. Image: Coinglass.

This move caused a substantial unwind of the yen-carry trade, culminating in a global stock market sell-off on Aug. 5, as investors offloaded U.S. assets to cover interest on their borrowed yen — an event that marked Japan's main stock index's worst day in 37 years.

According to Coinglass data, the last time the ether open-interest-weighted funding rate fell into negative territory was just before Sept. 18, coinciding with the U.S. Federal Reserve's dovish pivot and interest rate cut.

The price of ether increased by over 1.4% in the past 24 hours to trade at $2,638 at 07:49 a.m. ET. Bitcoin dominance is at 53.4%, and ether dominance is at 13.4%, according to CoinGecko data .

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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