Ether Shows More Bearish Sentiment Compared to Bitcoin as Trump Extends Lead Over Harris

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Risk reversals in the crypto market indicate a prevailing sentiment among traders to hedge potential downside risks for Ethereum (ETH) more than Bitcoin (BTC). This trend is particularly evident among derivative traders on decentralized exchanges, where there is a notable preference for mitigating risks associated with ETH.

Despite the ongoing U.S. presidential election dynamics, with Republican candidate Donald Trump gaining ground over Democrat Kamala Harris in prediction markets, the bearish outlook for ETH remains prominent compared to BTC. This disparity is reflected in the 25-delta risk reversals for ETH and BTC, which are currently more negative for ETH, signaling a stronger bearish sentiment towards the Ethereum blockchain’s native token.

Risk reversals play a crucial role in assessing market sentiment, as they measure the premium required for holding a call option in relation to a put option. Negative values in risk reversals suggest a bias towards put options, indicating expectations of a potential decline in the asset’s price.

Traders often utilize options to manage their exposure in spot and futures markets. In the current scenario, traders with bullish bets on spot and futures markets are seen buying put options to navigate potential downside volatility. This strategy is notably more pronounced among ETH traders, who are actively seeking to mitigate downside risks.

The risk reversal data for ETH options expiring on Oct. 11 reveals a -7.3% figure, while BTC stands at -5.8%. This pattern persists across various expiry dates, indicating a consistent trend of ETH traders being more cautious and risk-averse compared to their BTC counterparts.

Interestingly, a divergence emerges in risk reversals for BTC and ETH as the election date approaches. While BTC risk reversals turn positive for expiries post-Nov. 8, signaling expectations of upside volatility, ETH’s risk reversals do not shift towards a bullish sentiment until late December. This indicates that traders anticipate a delayed positive turn for ETH compared to BTC in the post-election period.

On decentralized exchanges like Derive, the sell-to-buy ratio for Ethereum call options was notably higher in September compared to Bitcoin options, suggesting limited upside potential for ETH. This imbalance in open interest highlights traders’ cautious approach towards ETH, with a focus on managing risks and expectations of constrained upside movements in the cryptocurrency.

The evolving dynamics of the U.S. election, with Trump’s lead widening over Harris, have implications for the crypto market. Trump’s perceived support for DeFi projects, including the recent proposal linking World Liberty Financial to Aave, has led to speculations about potential benefits for BTC and DeFi under his presidency.

However, some observers, like Standard Chartered, believe that a Trump victory could favor Ethereum rival Solana, while Ethereum may see greater growth prospects under a Harris administration. These contrasting views underscore the complex interplay between political developments and crypto market dynamics, shaping traders’ strategies and sentiments in the evolving landscape.