Institutional investors are showing a “strong preference for Ethereum over Bitcoin.” This is the conclusion of a new report by JP Morgan, which analysts made based on comparing the price of futures of the respective cryptocurrencies with their spot markets.
With regard to Bitcoin, they write that due to the correction this month, the futures price fell again below the spot price, while in August it rose above it. According to JP Morgan, this ratio is “an obstacle for bitcoin and a reflection of weak demand from institutional investors who tend to use Chicago Mercantile Exchange (CME) regulated futures contracts to enter bitcoin.”
As analysts explain, under normal conditions, when the demand for Bitcoin futures is not so low, contracts are trading above the market. This overpayment arises from the relatively low risk of gaining access to bitcoin through futures. Usually it is quite high and exceeds 5% in annual terms.
However, during periods of low demand and bearish expectations, futures start trading at a discount relative to the spot market. This was the case, for example, from May to July, and it is happening now. Ethereum futures, in turn, retain their overpayment, which rose to 7% in September. The divergence in the dynamics of demand for derivatives of the two cryptocurrencies has been observed since August. The price of bitcoin has dropped by 10% over the past month, while the price of ether has dropped by 5%.
“This indicates a much healthier demand for Ethereum compared to Bitcoin from institutional investors,” the report’s authors conclude.
This is not the first time that analysts at a large bank have expressed such a point of view. In May, Goldman Sachs released a paper on cryptocurrencies, describing bitcoin as a little wasted and ineffective tool while extolling ether as the future “Amazon of information.”
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I am Derek Black, an author of World Stock Market. I have a degree in creative writing and journalism from the University of Central Florida. I have a passion for writing and informing the public. I strive to be accurate and fair in my reporting, and to provide a voice for those who may not otherwise be heard.