Expert cites three reasons for Bitcoin’s weak momentum

The implementation of institutional inflows, the ease of opening a short position as a hedge against a market downturn, and the rising popularity of pair trading with other cryptocurrencies explain Bitcoin’s relatively weak momentum versus other digital assets.

1/ BTC has lagged the performance of other crypto assets through the last cycle

most traders intuitively feel that BTC trades “heavy” – why is this happening?

there’s two simple metrics we can look at to validate what we intuitively feel: pic.twitter.com/wOB30wJi6X

— Joshua Lim (@joshua_j_lim) August 29, 2022

Joshua Lim, head of derivatives at Genesis Trading, explained that this “heavy” feel of digital gold is evident in the ETH/BTC ratio and Bitcoin’s dominance in the market.

The first metric (0.0733) has moved toward its historical high (0.088). Ethereum’s edge over Bitcoin is also evident in the put-to-call ratio on options markets — 0.24 to 0.53. The second metric remained near a historical minimum of 40%, despite the bear market. The expert attributed this to the increasing share of the second-largest cryptocurrency.

Lim explained that the flows factor from institutional players has run its course, since Bitcoin is available via CME futures, exchange-traded products and even direct investments (Coinbase shares).

Bitcoin already accounts for a significant share of digital assets in traditional investors’ portfolios. This means not only an asset that is shed when the market turns, but also one that is kept as beta hedging.

The daily trading volume of Bitcoin futures is $30 billion and accounts for 44% of open interest, despite a surge of interest in Ethereum speculative activity, Lim argued.

The expert noted that Bitcoin’s prospects face a challenge from the value proposition of the second-largest cryptocurrency ahead of The Merge.

There may also be a risk around Mt. Gox coin distribution and the lack of confirmation of the thesis that Bitcoin is a hedge against inflation.

According to Lim, the relevance of the factors he mentioned will be tested by time after the merger. Until then, he does not see grounds for Bitcoin to trade “better than the market”.

As reported on August 26, Bitcoin hit a fresh low since mid-July following remarks by the Fed Chair Jerome Powell. The following day, Bitcoin fell through the $20,000 level.

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