According to analysts at the US investment bank JP Morgan, Ethereum, the second-largest cryptocurrency by capitalization has become more attractive than Bitcoin.
JP Morgan report reveals institutional investors prefer Ethereum
In September, on the Chicago Mercantile Exchange (CME), the world’s largest derivatives market, the price of Bitcoin derivatives traded lower than that of the cryptocurrency.
According to JP Morgan, this is evidence that demand from institutional investors for Bitcoin has been rather weak.
Futures represent a bet on the price of an asset and are largely traded by large institutional investors.
This is why the futures market is much larger in terms of volume than the spot market.
Specifically with regard to Bitcoin, the daily value traded on the spot market amounts to about $23 billion, while that on futures amounts to over $65 billion.
While Bitcoin futures in September reportedly traded at a lower value than the cryptocurrency, Ethereum futures saw their prices rise by 1% compared to the ETH cryptocurrency on the spot market.
Analysts at Jp Morgan said:
“[This] points to much a healthier demand for Ethereum vs. Bitcoin by institutional investors”
The cryptocurrency futures market
Cryptocurrency derivatives are a form of investment in digital currencies without having to buy the cryptocurrency itself on the market and are more aimed at institutional investors.
The first Bitcoin futures were listed on the CME in Chicago on 8 December 2017. Cryptocurrency futures are used not only by institutional investors but are also a useful tool for example for Bitcoin miners to safeguard the prices on which their future earnings from their business depend.
Futures are also used by some investors to hedge their positions in the spot market, as a hedge in case prices fall.
And they are a means of providing the rules of being listed on regulated markets that the spot market does not, as seen in the many investigations opened halfway around the world against major crypto exchanges, with Binance leading the way.
The fact of trading futures means that investors are not subject to the risk of the very high volatility that characterises the prices of the main cryptocurrencies.
According to the latest report by the analysis company specializing in cryptocurrencies, TokenInsight, the total volume in the first quarter of 2021 of futures contracts was $2.07 trillion, representing 6.77% of the total market volume.
The eternal rivalry with Ethereum for crypto supremacy
When Vitalik Buterin launched the revolutionary platform in 2013, which brought the smart system to the attention of the blockchain world, some observers speculated that ETH would soon overtake the king of cryptocurrencies, Bitcoin.
Whether this prediction has come true is yet to be seen, but it is certain that many analysts believe ETH’s future could be far more promising than that of Bitcoin.
It is precisely the analysts at JP Morgan who, in a report last July, stated that:
“Bitcoin (BTC) is more of a crypto commodity than currency and competes with gold as a store of value, whereas ETH is the backbone of the crypto-native economy and therefore functions more as a medium of exchange. To the extent owning a share of this potential activity is more valuable, the theory goes, ETH should outperform BTC over the long run”.
Even the queen of American investment banks, Goldman Sachs recently published a report arguing that ETH has the potential to outperform bitcoin in the coming years.
Reinforcing this thesis, the investment bank pointed out that from January 2021 to July of the same year, ETH had grown by 1501% compared to BTC’s 357%.
According to many analysts, the fact that Ethereum does not present itself as an alternative to traditional currencies like Bitcoin, but as a platform to facilitate transactions on the blockchain through its smart contracts, certainly makes it a more reliable, secure, transparent and scalable project.
It is easy to envisage that the rivalry between the two main cryptocurrencies will continue for a long time to come on both traditional and derivatives markets.