Ether's Remarkable Rally Against Bitcoin: A Singular Event or a Shift?

Ether (ETH), the native token of Ethereum's smart-contract blockchain, experienced a remarkable surge of 12.2% on Thursday, surpassing Bitcoin in performance for the first time in a substantial period. This surge was propelled by reports indicating BlackRock (BLK), the world's largest asset manager, is considering the creation of an exchange-traded fund (ETF) focused on purchasing ETH. The ether-bitcoin ratio saw a significant rise of 9%, marking a departure from 17-month lows.

The options market is signaling that Ether's outperformance might extend beyond a singular event. The spread between Deribit's forward-looking 30-day implied volatility indices for Ether (ETH DVOL) and Bitcoin (BTC DVOL) turned positive within the last 24 hours, reaching a peak of 5.9%, the highest since April, as reported by Amberdata. Implied volatility reflects investors' expectations regarding price turbulence over a specific period.

This positive shift suggests that traders anticipate heightened activity in Ether over the next four weeks. It's possible that optimism surrounding the imminent launch of a spot Bitcoin ETF in the U.S. has already been factored into the market, leading the focus to shift towards Ether.

Jeff Anderson, a senior trader at STS Digital, remarked,

"The market has been chasing BTC for the last month, but it looks like the spot BTC ETF launch is now very close to being priced in. ETH was left behind in October, but the BlackRock filing yesterday reminded everyone that a similar product is not far behind." 

Anderson added that the rotation out of BTC into ETH during alt season was attractive, prompting market participants to chase Ether as it displayed signs of vitality.

While Bitcoin has surged over 35% since early October, primarily driven by expectations of a potential spot ETF, Ether's smaller market cap of $252.41 billion compared to Bitcoin's $713.10 billion positions it for potentially more significant impacts from similar inflows. Griffin Ardnern, a volatility trader from crypto asset management firm Blofin, noted, 

"ETH has a relatively minor market cap than BTC, which means that when the same size of liquidity flows into ETH, the price of ETH will be pushed higher, and the volatility will be greater."

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