Despite some traders’ optimism that it would turn around this year, ether had a more severe selloff than bitcoin this week as worries about President Donald Trump’s tariff proposals weighed on cryptocurrencies.
The United States put a 10% extra duty on Chinese goods on Monday, but agreed to postpone for a month the penalties it had previously levied on Canada and Mexico last weekend. China responded Tuesday by announcing a 10% tariff on crude oil, agricultural equipment, and large-engine automobiles that will take effect on Monday and a 15% duty on U.S. coal and liquefied natural gas goods.
According to Dow Jones Market Data, ether (ETHUSD) fell 12.5% over the last seven days amid this uncertainty, trailing bitcoin (BTCUSD), which fell 6.2%. Last Sunday, Ether had a flash crash as well, increasing its slide to as much as 27% before reducing losses.
According to Quinn Thompson, founder and chief investment officer at cryptocurrency hedge fund Lekker Capital, ether suffered a bigger decline this week than bitcoin since more leverage has been built around the former in relation to each coin’s market capitalization. Greater leverage can accelerate a price loss in an asset because it may push highly leveraged traders who bet on a move in the opposite direction to liquidate their positions, further depressing the asset’s price.
According to Thompson’s phone interview, some traders were placing bets that ether, which underperformed last year, will overtake bitcoin this year.
As of Tuesday, CME statistics showed that the open interest in ether futures on the Chicago Mercantile Exchange was 1.1 million ether. By contrast, there is approximately 166,400 bitcoin in open interest in bitcoin futures on CME. The entire amount of outstanding, unresolved derivative contracts is known as open interest.
According to Thompson, ether’s leverage increased more quickly than bitcoin’s in recent months, despite the fact that bitcoin futures have a far higher cash value than ether.
As of Tuesday, open interest in bitcoin futures was approximately $57.8 billion, which was over twice as much as that of ether, which was about $23.2 billion. But at around $2 trillion, the market value of bitcoin was about six times that of ether, which was $335.1 billion.
The open interest of ether futures more than tripled from its level in early November of last year based on the quantity of coins, indicating a faster build-up of leverage. After rising in November and December of last year, open interest in bitcoin was about the same as it was in early November.
According to Thompson, some cryptocurrency bulls were hopeful that the Trump administration would create a more benevolent regulatory climate in the United States, which may be especially advantageous for Ether.
In order to encourage more investors to allocate to ether and raise its price, the bulls hoped that the U.S. Securities and Exchange Commission would permit ether exchange-traded funds to stake the ether they own. Through the practice of staking, Ethereum holders secure the Ethereum blockchain and validate transactions by locking up their cryptocurrency in exchange for more coins.
Because of the regulatory ambiguity surrounding staking under the Biden administration, issuers have made the concession that current ether ETFs do not stake the ether they invest in.
The Ethereum Foundation, which backs the blockchain, claims that staking ether presently yields an annual return of 3.2%.
In the meantime, the Ethereum blockchain serves as the foundation for the cryptocurrency project World Liberty Financial, which is connected to Trump and his family. With Trump in the White House, some cryptocurrency bulls have been expecting him to reveal policies that would be particularly bullish for ether.
Bitcoin’s dominance, or the ratio of its market capitalization to the entire market capitalization of cryptocurrencies, surged to as high as 64.3% on Monday, the highest level since February 2021, after big cryptocurrencies withdrew this week.
Currently, “bitcoin was clearly a flight to safety asset in the crypto space,” according to James Lavish, managing partner at the Bitcoin Opportunity Fund investment fund.
