Ether underperformance compared to bitcoin may persist, as indicated by the U.S. Treasury government bond market’s recovery of the yield spread between the 10- and three-month notes. The crypto market has displayed an inverse relationship with this yield spread, with gains during inversion and losses during dis-inversion. While bitcoin’s correlation with the yield spread has weakened, ether’s correlation remains strong. The recent dis-inversion could potentially impact ether more than bitcoin, especially considering the optimism surrounding a potential spot ETF launch. This aligns with the narrative that views ether as rate-sensitive technology stocks and bitcoin as ‘digital gold.’
Ether’s Strong Correlation with Yield Spread
In the first five months of this year, the spread fell by 130 basis points. Most of the gains for bitcoin and ether, 72% and 32% respectively, occurred in the first half of the year. The strong correlation between ether’s price and the yield spread highlights the sensitivity of ether to changes in the bond market. This relationship suggests that ether underperformance may continue as the yield spread dis-inverts.
Bitcoin’s Weakening Correlation with Yield Spread
On the other hand, bitcoin’s correlation with the yield spread has weakened over time. This indicates that bitcoin may not be as significantly impacted by the dis-inversion of the yield spread as ether. As a result, bitcoin could potentially maintain its gains or even outperform ether in the current market conditions.
Spot ETF Launch Optimism
The optimism surrounding a potential spot ETF launch has also contributed to the ether underperformance narrative. A successful launch could further boost bitcoin’s market position and attract more investors, leading to a widening gap between the performance of bitcoin and ether.
Rate-Sensitive Technology Stocks and Digital Gold
The current market dynamics align with the narrative that views ether as rate-sensitive technology stocks and bitcoin as ‘digital gold.’ As the yield spread dis-inverts, rate-sensitive assets like ether may experience a decline in value. Conversely, assets perceived as safe havens, such as bitcoin, could potentially maintain or even increase their value.
Conclusion
In conclusion, the dis-inversion of the yield spread suggests that ether underperformance may continue in comparison to bitcoin. This analysis takes into account the inverse relationship between crypto prices and the yield spread, as well as the potential impact of a spot ETF launch. Investors should closely monitor the yield spread and its relationship with the crypto market to make informed decisions about their investments in ether and bitcoin.
