Dual Asset ETH-BTC: Innovative Tools to Trade the Relative Performance of ETH Against BTC
Market Has Been Dying for ETH-BTC Trade Tools
When it comes to crypto blue chips, the first assets that come to mind are Bitcoin and Ethereum. These two cryptocurrencies are similar in that most investors hold the majority of their crypto assets in either BTC or ETH. However, they also differ significantly in many aspects, such as their consensus mechanisms (proof of work vs. proof of stake), their primary use cases (digital gold vs. smart contract platform) and numerous other contrasts.
Given the importance of these two leading cryptocurrencies in investors' portfolios, it’s crucial to provide tools that allow users to switch positions between Bitcoin and Ether. Bybit has pioneered an industry-first solution in the form of the ETH-BTC Dual Asset tool.
This innovative offering allows investors to effectively manage their exposure to the relative performances of the BTC and ETH markets, providing a seamless way to capitalize on diverging price movements between these two crypto blue chips.
Source: Bybit
As a thought leader in the industry, Bybit publishes quarterly asset allocation reports to inform its investors. Our historical reports show that Bitcoin (BTC) and Ether (ETH) make up 35% of investors' total assets, a figure that could grow closer to 50% in institutional portfolios. This trend may vary quarter-to-quarter, following shifts in investors' risk preferences. In contrast, the demand for trading pairs against altcoins is relatively small.
When market sentiment shifts to "risk-on," investors might sell their positions in Bitcoin to allocate more to altcoins, and vice versa during "risk-off" periods. This leads to frequent position changes and challenges with market timing.
The ETH-BTC Dual Asset product presents an opportunity to avoid these pain points. To begin with, switching from BTC to ETH (or vice versa) could replace the need to trade between Bitcoin and Ether. Additionally, if your target ETH/BTC ratio hasn’t been reached, your Dual Asset transactions won’t be completed, saving you transaction fees while still earning you yields.
As an industry leader, Bybit provides investors with innovative tools to better manage their exposure to the top cryptocurrencies and capitalize on their relative performances.
ETH-BTC Trading Pools Could Amplify Returns
ETH/BTC ratio. Source: Bybit
Investors have significant opportunities to trade on the relative performances of the ETH-BTC pair. The ETH/BTC ratio, which gauges the relative price performance between Ether and Bitcoin, has fluctuated over time between 0.085 and 0.044.
This dynamic trading opportunity, based on the relative performances of ETH and BTC, can provide an additional avenue for investors to generate returns beyond simply holding the individual assets. The ability to capitalize on the diverging price movements between these two major cryptocurrencies can be a valuable portfolio management strategy.
| 50% in BTC, 50% in ETH | 80% in BTC, 20% in ETH |
Initial Position on Oct 1, 2022 | 1,000 | 1,000 |
Position on Oct 1, 2023 | 1,350 | 1,410 |
Source: Bybit
As shown above, you could potentially earn up to 6% more by betting on the current direction of the ETH-BTC pair during a period in which BTC is strongly outperforming ETH, such as during a bear market.
As a short summary, a successful bet on the correct relative direction of the ETH-BTC pair could amplify your returns, while still allowing you to maintain a diversified portfolio between the top two largest cryptocurrencies by market capitalization.
More importantly, you could earn an even higher yield by utilizing Bybit's Dual Asset feature, as it allows you to earn a fixed yield by betting on the up or down direction of a specific token (such as BTC or ETH) against that of USDT.
What’s more, Dual Asset allows traders to generate yield regardless of the overall market direction, making it a potentially attractive option for those looking to earn returns even in volatile or bearish market conditions.
It’s Not Only a Trading Pair — It’s a Trading Tool
It should be noted that this isn’t simply a trading pair that enables you to sell BTC directly and buy ETH, or vice versa.
Instead, it allows you to automate your trading based on the relative performance of the ETH-BTC pair. You can set a target ratio, and the tool will execute the transaction when the market reaches it. Another important feature is the ability to earn yield during the time you hold a position (which can be found here).
Prior to the launch of the ETH-BTC Dual Asset pair, Bybit was an industry pioneer in launching a Dual Asset tool that features a diversified pair of tokens against USDT, allowing you to bet on the up or down direction of a specific token while earning a fixed yield embedded in the trading pair.
Conditions Favorable to BTC and ETH
Conditions Favorable to BTC | Conditions Favorable to ETH |
Loose macroeconomic conditions | Loose macroeconomic conditions |
Risk-off sentiment | Risk-on sentiment |
Bear market | Bull market |
Strong inflows to BTC Spot ETFs | Stronger inflows to ETH Spot ETFs |
Booming Bitcoin Layer 2 | Booming Ethereum Layer 2 developments |
Bitcoin halving | Major Ethereum upgrades |
Lower BTC reserves on centralized exchanges (CEXs) | Lower BTC reserves on CEXs |
| Surging Ethereum revenue |
| Killer DApps launch |
The above is a general prediction of the relative performances between Bitcoin and Ethereum. However, real-world conditions are more complex, with many factors that need to be assessed together. The actual performances of these two cryptocurrencies will depend upon a variety of market conditions, regulatory changes, technological developments, adoption rates and other variables that can influence their prices and usage. A more thorough analysis would be required in order to make an accurate forecast of their future relative performances.
How to Trade
You can find more details here.
Buy Low
When you buy low, you invest in BTC:Choose a target price lower than the current price in order to buy low and get more ETHthan you would if you bought at the target price.
When: | Executed? | What Does It Mean? | You Receive: |
Settlement Price ≤ the target price you choose | Executed | You’ll buy ETH with your BTC, while you receive some yield in ETH |
|
Settlement Price > the target price you choose | Not Executed | Your BTC remains in BTC, while you could still get some yield in BTC |
|
Sell High
When you sell high, you invest in ETH: Choose a target price higher than the current price in order to sell high and get more BTC than you would if you sold at the target price.
When: | Executed? | What Does It mean? | You Receive: |
Settlement Price ≥ the target price you choose | Executed | You’ll sell ETH for BTC, while you get some yield in BTC |
|
Settlement Price < the target price you choose | Not Executed | Your ETH remains in ETH, while you could still get some yield in ETH |
|
Disclaimer
The above calculations and examples are for demonstration purposes only. In order to deliver the message, the examples may simplify potentially complex scenarios, and the yield embedded in Dual Asset products can vary over time when entering a contract. The actual performances and yields of these products may differ from the simplified examples provided, as real-world conditions are more dynamic and complex.