After the Federal Reserve's interest rate cut, Ether outperforms Bitcoin.
Since the Federal Reserve lowered the federal funds rate by 50 basis points on 9/18, Ether has outperformed Bitcoin. During this period, Ether has surged by over 16%, while Bitcoin has risen by about 6%. The ETH/BTC pair has climbed from around 0.3850 to 0.4181, marking a weekly increase of 6.71%.
Table of Contents
Interest Rates for Ethereum Financing Turn Positive, Increasing Demand for Leveraged Long Positions
According to a report by The Block, Ruslan Lienkha, the market director of the cryptocurrency exchange YouHodler, stated:
The positive interest rates for Ethereum reflect an increase in demand for leveraged long positions, indicating a bullish outlook.
Lienkha added that the financing rates in the cryptocurrency market often intensify volatility. While financing rates usually indicate medium to long-term trends in commodity markets, the volatility of cryptocurrency financing rates is significantly higher. He believes that opening short positions under the expectation of a long squeeze seems too risky at the moment. However, he also cautioned that there is a risk of market adjustments if optimism becomes excessive or external factors change.
Ethereum and Altcoins Outperform Bitcoin
The Bitfinex Alpha report suggests that altcoins, including Ethereum, have outperformed Bitcoin as they have broken free from six months of open interest contracts and suppressed valuations. The improvement in financing rates on major exchanges also indicates a positive shift in market sentiment.
Financing rates on major exchanges are improving, and the basis yield is becoming more attractive, especially after the recent rate cut.
Despite this rebound, the Bitfinex report still expresses concerns about rising volatility. The amount of altcoin holdings has now exceeded the levels before the deleveraging event in August, posing a risk of significant market fluctuations. The report notes: "Open interest contracts have reached $11.48 billion, surpassing the August peak of $10.74 billion, which is a concerning sign of potential volatility in the altcoin market."