The performance of ether recently created significant buzz in crypto markets and beyond, both in absolute terms and relative to other cryptocurrencies, particularly bitcoin. As shown in the chart above, ether has experienced a strong relative bounce after years of decline. Using Fibonacci retracement levels and looking at the move from the highs in late 2021 to the lows earlier in 2025, the market is approaching a 38.2% retracement level. Will this be where the relative performance ends, or will the ratio move into the neutral zone that ranges between 38.2% and 61.8% retracement? In order to assess what may be the next move, at least in the short-term, we should look at what could be driving the relative moves.

One potential driver of relative performance is the easiness or tightness of financial conditions. The orange line represents U.S. financial conditions,serving as a proxy for global liquidity. As financial conditions ease (represented by a higher orange line), crypto investors tend to take on more risk, favoring ether over bitcoin (as seen in 2021, for example). When financial conditions get tighter, there is a move into quality and bitcoin outperforms, as traders saw in 2022 and 2023. The difference has been that financial conditions have been easy for the past two years, yet ether only recently started outperforming. Thus, it is difficult to have too much confidence that this alone is driving the relative move in the pair.

The previous financial conditions index focused solely on the U.S.; however, a more comprehensive measure of global liquidity can be found in a custom index that aggregates the balance sheets of four of the largest central banks: the U.S., EU, Japan and China. Perhaps to the surprise of many, this index has been declining for the better part of the last four years, led by the quantitative tightening seen in the U.S. While the index has stopped falling and has stabilized this year, it hasn’t turned higher, thus it is not consistent with the relative move higher seen in ether vs. bitcoin. Perhaps ether is sensing central banks are going to begin to grow balance sheets again, as many are in easing mode. However, markets have yet to see validation of this in the data on central bank balance sheets.

Examining the Commitment of Traders report, we see how leveraged money has adjusted its positioning following recent market moves. The top chart indicates that leveraged money has reduced its short position in bitcoin to levels not seen since early 2024. While still short overall, it’s the smallest short position in 2025. Leverage money clearly prefers shorts in ether as the short position has grown sharply in the last two months to now stand at the shortest recorded over the last three years. It appears that leveraged money is showing a preference to fade this relative move higher in ether vs. bitcoin that has taken place in the last two months.

Now on to the technical analysis. The top chart shows the daily Ichimoku chart for generic front-month Bitcoin futures. After the recent fall from all-time highs, bitcoin held support at the lower end of the Ichimoku Cloud, which itself is indicating a rising trend. In addition, the lagging span in red never breached the Ichimoku Cloud, indicating the trend higher is still in place. Finally, in the middle panel, the MACD is turning higher and crossing over, suggesting a change in direction might be about to unfold.  The bottom chart is the daily Ichimoku chart for generic front-month Ether futures. While it does indicate a strong trend, there are a couple of negatives that need to be pointed out. First, although ether’s price reached new highs in late August after an earlier peak, the RSI did not confirm this, leading to a negative divergence. Second, the MACD has crossed over and moved lower, suggesting a possible short-term change.  Overall, the daily charts show more positive developments for bitcoin and more negative ones for ether.

This chart is the relative price ratio analysis of generic front-month Bitcoin futures  vs. Ether futures, the inverse of the spot chart we looked at earlier. I like to look at the inverse of price charts, often with no label, to see if my instinct from the original chart is confirmed or not. It is a way for me to avoid any bias in assessing a chart. Upon assessing this chart, it appears that the index, after a very strong 2024, retraced all its gains and returned to 2025 lows. However, the price is now around the 25 level, near its previous low, suggesting a potential move higher. If this occurs, we might see bitcoin rally relative to ether, a trend not clearly indicative by relative spot price.

On to an analysis of the volatility markets. The top chart shows implied vs. historical volatility of bitcoin. Both levels have fallen throughout the year from the 60-ish level to the 40-ish level. Recent historical volatility has picked up above implied volatility, and implied volatility looks to be turning higher. Considering that volatility is at its lowest level in the past 12 months, this appears to be a somewhat positive setup for owning Bitcoin options. Ether volatility has remained rangebound at a higher level throughout the year, with implied volatility fluctuating between 60 and 75. This seems largely unaffected by historical volatility, which tends to spike every other month before reverting to its mean. Although ether’s volatility is higher than bitcoin’s, hovering in the mid-60s, there’s no clear trend or strongly bullish/bearish signal. As ether has rallied, its implied volatility seems to be narrowing into a tighter range.

Considering these factors, a long bitcoin vs. ether position, expressed through options, appears to be a favorable setup. The relative spot price is encountering Fibonacci resistance at the 38.2% retracement level. Conversly, the inverse price ratio, currently around25, seems to be holding and could indicate a move towards 35 or 40. Financial conditions are easy but do not appear to be as influential in the pair as they have in the past, and unless there is a change, it does not look like central banks are going to grow their balance sheets, which has been a driver for ether relative tobBitcoin in the past. The individual technical chart for bitcoin has more positives and the chart for ether more negatives. Leveraged money is reducing its bitcoin short in favor of adding to the ether short. Bitcoin implied volatility is low and possibly turning higher, while ether implied volatility is rangebound.

Given this analysis, I’m looking to buy bitcoin calls financed by selling ether calls. This is a short-term trade, targeting a reversion to the mean, with a Friday expiration three weeks out. The bitcoin calls are 10% out of the money, trading a 36 implied volatility, costing 849 ticks ($4,245 per contract, with each tick worth $5). The ether calls I’ve chosen to sell are nearly 14% out of the money, trading at a 66 implied volatility, and cost 109 ticks ($5,464 at $50 a tick). By selling a much higher volatility, I can set the strike price further out of the money while still netting a premium.

If both futures move lower and both calls are out of the money, a trader will make about $1,200, the difference in the premiums. If both coins move higher, it depends on what happens to the relative price ratio as to whether the trader would make or lose money. This trade is long the relative price ratio, which is currently at 25 (125,000/5,000), representing the low level seen in the ratio of generic front-month futures. If the ratio rises to, say, 30, it could occur in several ways. If ether remains around 4,400 and bitcoin moves to 132,000, Ether options would be out of the money while Bitcoin options would be deep in the money. Even if Ether options move in the money ( e.g., on a move to 6,000), the trader could still profit if the ratio increases, as this would correspond with bitcoin at 180,000. Ether would have to move above 5,000, with bitcoin remaining below 125,000, which means that the ratio would fall below 25. While possible, the entry level remains attractive on a reward-to-risk basis, as it would represent a move to levels not seen in over a year.

I favor these trades not because they are guaranteed, but because they offer a win in two out of three scenarios: either both futures fall (regardless of the ratio) or both rise with the ratio. I only incur a lose if both futures rise and the ratio falls, a risk I’m willing to accept.

CME Group provides traders with the products and tools necessary for effective trading and analysis.

Good luck trading!

The opinions and statements contained in the commentary on this page do not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs. This content has been produced by [Data Resource Technology]. CME Group has not had any input into the content and neither CME Group nor its affiliates shall be responsible or liable for the same.

CME GROUP DOES NOT REPRESENT THAT ANY MATERIAL OR INFORMATION CONTAINED HEREIN IS APPROPRIATE FOR USE OR PERMITTED IN ANY JURISDICTION OR COUNTRY WHERE SUCH USE OR DISTRIBUTION WOULD BE CONTRARY TO ANY APPLICABLE LAW OR REGULATION.