The relative performance of Ether vs. Bitcoin futures has been something that institutional investors have paid attention to since they started investing in the asset class. With the exception of some brief multi-month periods in 2023 and 2025, Ether has lagged Bitcoin for the past 5 years. As a result, the two are really thought of as just “crypto” by institutional investors, while those in the digital asset ecosystem know and feel strongly about the two different use cases. That may be changing, however. As digital assets look to possibly feel a low and begin the end of the latest “crypto winter,” one can see on a year-to-date basis that Ether is showing signs of leading off of the lows. It begs the question of whether this is just the latest of the multi-month moves after which Bitcoin reasserts its leading properties, or if something different is happening. 

What might be the catalyst for a change in relative performance? It may be the performance of the digital asset treasury companies. These “dats” as they are called dominated early 2025 performance as companies adopted ownership of crypto. It coincided with the debasement of the dollar theme that was driving through markets, from gold to silver to crypto. The poster child for the dats is the original – Strategy Inc – led by Michael Saylor which became the largest holder of bitcoin. Then along came Tom Lee as Chair of Bitmine Immersion Technologies who went all in on ether vowing to buy 5% of existing supply. All of the digital asset treasury companies have struggled in the past 12 months. Whether it was the weakness of the companies that led the weakness in crypto or vice versa, all moved lower. Over this time, as one can see in the chart above, Bitmine Immersion Technologies have outperformed. Perhaps this is because Bitmine continued to buy ether, staking its holdings and generating a yield, while Strategy had to finally give in and begin to tactically sell bitcoin, something it said it never would, this past July. With a large holder of ether deciding to still buy and hold while a large holder of bitcoin is selling, even though it is only a portion of the holdings, is it time for ether to begin to outperform bitcoin in earnest?

Over the last several weeks, Ether futures are indeed showing signs of life, rising more than 25% off the lows. Futures have also broken into the Ichimoku cloud, something that has defined the downtrend over the past 12 months. The cloud resistance comes in around 2100, and there is no further resistance until markets approach 2500. The relative strength index is now showing signs of being overbought in spite of the sharp rally from the lows. Finally, the MACD has crossed higher and indicates the potential for a change in trend. While the chart would not be confirmed as bullish until the close above 2100, and preferably see the lagging span above as well, there are signs of life in Ether futures. 

Next, I would like to see the relative pricing in the options market. For this I use the options info in QuikStrike and compare the trailing 1-month historical volatility to the forward-looking 1-month implied volatility traders are pricing into the options market. As one can see, the implied volatility is priced below the historical volatility, an unusual phenomenon, where there is no volatility risk premium. This may be the case because traders feel the worst is over in the downtrend as lower futures prices have coincided with moves higher in volatility in the past. Either way, it does suggest that the bar is not that high for owning options at this point. 

Now I want to compare the relative pricing of expirations vs. one another and the pricing of calls and puts relative to each other and the at-the-money options. This will help me identify the appropriate expiration for my views as well as the appropriate strikes for the trade. The implied volatility surface shows that at-the-money implied volatility is lower for the ETHQ26 expirations. Perhaps this is not surprising when one considers that the August expiration contains a period when the global market is typically very quiet because of all of the August vacations that occur in Europe and Asia. While the number is lower, it may be because of the perception that activity will be light. However, another interpretation is that markets will be thinner and any move in the futures market could potentially have more volatility. I can then look at the skew and kurtosis within that expiration to see the relative pricing of calls and puts vs. the at-the money. It is clear that the slightly out-of-the-money calls trade at a discount to both, suggesting any option buying might be ideal in these strikes. That said, the further I go out of the money, the premium to the options vs. the at the money and other strikes within the expiration returns. This may suggest that option spreads that take into account this relative pricing are preferred. 

The spread I have chosen is a call butterfly where the strikes are consistent with both the technical chart of the futures as well as the relative pricing that I see in the skew. I have gone long the 2100 calls, 30 delta calls that trade at a discount to the strikes around it, that also coincide with the breakout level on the Ichimoku cloud chart. To reduce the cost, I have sold 2400 calls that are 10 delta and which trade at a 3.5 vol point premium to 2100 calls. To better define the risk and reward of the strategy, I turn it into a call butterfly buying the 2500 calls. While the implied volatility is higher, the premium is much lower because of the low delta. This 1 by 2 by 1 butterfly is intentionally asymmetric, meaning if futures break above the high strike at 2500, the trade still makes money. That is because the trade makes 300 points from 2100 to 2400 and only gives back 100 points on the move to 2500. That means on moves above 2500, traders would make 200 less the net premium of 31.7 or 168.3. If futures fail to break out and move back lower, the risk of the spread is fixed at the premium paid of 31.70. The strategy maximizes if futures go up to 2400 and close there in a month at expiration. This is near resistance in the futures market and if it happens traders would make 300 less 31.7 or 268.3. Thus, the reward to risk is maximized at 268.3/31.7 or 8.46 to 1. Even with a massive rally, the reward to risk is 5.3 to 1. This gives traders a lot of leverage to play a breakout in the futures market.

Finding an attractive reward to risk in futures that have both technical and maybe fundamental support is the beauty of the options market. The opportunity may present itself because many have left the Ether market for dead and would probably be surprised to know it is 26% off the lows. It is not without risk, however, and defining the risk in a fixed premium way can give traders the edge and the comfort to trade the long side of a market that has been out of favor. 

Good luck trading!

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