Never miss a story from Nick Cawley

Subscribe to recieve updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to Nick Cawley

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Cryptocurrency Spread Trade

- Trading Ether and Bitcoin against each helps remove general cryptocurrency market risk.

- Ether continues to out-perform Bitcoin.

If you are new to trading cryptocurrencies, or are just looking to refresh your trading knowledge, please see the DailyFX ‘Guide to Day Trading Bitcoin and other Cryptocurrencies’.

Trading the ETH/BTC Spread

Cryptocurrency trading is notoriously volatile with price swings of 20%+ seen in times of heavy turbulence. And in most of these cases, all cryptocurrencies move in the same direction, either sharply up or down, leaving traders exposed to market risk. And while cryptocurrencies are different with specific news and announcements also major drivers for market moves, general market sentiment continues to be the main theme of the cryptocurrency space.

One way to reduce market sentiment risk is by trading two cryptocurrencies against each other – a spread trade. A look at the latest Ether (ETH)/Bitcoin (BTC) spread shows that ETH has been outperforming BTC over the last 6 weeks, moving up from around 0.0580 to a current level of 0.0832, a rise of just over 43%. The basis behind this move is that traders believe that ETH has more value than BTC as a company or network, while market positioning and sentiment will also have played a part in the move.

A comprehensive guide to Bitcoin (BTC)

A comprehensive guide to Ether (ETH)

A look at the latest IG Client Sentiment Report shows that customers are 73.6% net-long of Bitcoin and 91.0% net-long of Ether. While this is a contrarian indicator – bearish for both – daily and weekly changes in net-longs and net-shorts impact on overall retail sentiment.

The strong uptrend remains in place, while on this four-hour chart the price remains above the 200-day moving average, a bullish sign. At the bottom of the chart the RSI indicator is around 46, just above the four-recent oversold reversal signals at 39.

ETH vs BTC Price Spread Four Hour Chart (April 6 – May 22, 2018)

ETH vs BTC - Ether and Bitcoin Spread; De-Risking Crypto Trading?

--- Written by Nick Cawley, Analyst.

You can contact the author at Nicholas.cawley@ig.com or via Twitter @nickcawley1.