Summary Trump's victory and supportive speeches have led to a significant capital inflow into crypto ETFs, with Bitcoin reaching all-time highs. Bitcoin's peak may deter investors, making Ethereum a more attractive alternative, especially given its strong recent performance relative to Bitcoin. Ethereum's potential for DeFi growth and its programmable blockchain platform offer compelling reasons for investment amidst the current crypto market dynamics. Investment Thesis I recommend buying Ethereum ( ETH-USD ). Trump's victory and his speech in favor of cryptocurrencies do not seem to be just noise. After Trump's victory, there was a record flow of purchases of crypto ETFs. However, as predicted , B itcoin ( BTC-USD ) has reached new all-time highs, and this may bring skepticism to investors. In this case, Ethereum may present a good risk-return ratio, and its momentum already seems to be showing positive signs. The Result Of The Elections Donald Trump was the big winner of the American election . The Republican Party also won a majority in the Senate and is very close to winning a majority in the House. This dominance helps Trump put his plans into practice. Trump (bitcoin2024) Trump's Speech It is worth remembering that Trump himself launched a cryptoasset venture, and his speeches were to make the United States of America the capital of cryptocurrencies . After the elections, data shows that the "possible" flow into cryptocurrencies is becoming a reality. BTC ETF inflows (Syz) As we can see above, Trump's victory led to a strong buying flow in Bitcoin ETFs. It is interesting to note that the day after the election result, the capital inflow in one day was similar to that of an entire week, an absurd flow. What was the effect of this? Bitcoin is at its all-time high , and logically this brings aversion to investors looking for a good risk-return ratio. In any case, there are other interesting options for exposure to the crypto market. Ethereum, The Alternative? Ethereum, like Bitcoin, is a blockchain that allows cryptocurrency to be transferred between individuals without the need for an intermediary. But it is also a programmable platform on which developers can create decentralized applications. But since cryptocurrencies are primarily flow-driven, it struck me that Ethereum achieved its best performance relative to Bitcoin since May, with renewed hopes for DeFi growth. ETH/BTC (Syz) This relationship made me quite curious, and I went looking for more information about the relative performance of Etherum versus Bitcoin. This relationship made me believe that there is an opportunity here. Let's see. ETH/BTC Ratio (Visual Capitalist) We can see from the chart above that the Ethereum/Bitcoin ratio is quite favorable to Bitcoin, indicating that if it returns to the average, Ethereum's upside would be over 100%, which corroborates my buy recommendation. But what would be the trigger for this? Triggers for Ethereum to Fire It is interesting to note that altcoin seasons, when other cryptocurrencies outperform Bitcoin, occur after strong Bitcoin rallies (as we are seeing). This occurs because Bitcoin price corrections tend to make investors look for other cryptocurrencies. Additionally, Ethereum has links with the decentralized finance (DeFi) ecosystem, which could suffer from regulatory scrutiny post-election. Trump's election appears to be beneficial in this regard, and future appointments to regulatory positions could be a trigger. Potential Threats To The Bullish Thesis The main risk to the thesis concerns the aggregate open interest of Ethereum futures, which reached a new all-time high and could act as a warning sign. Let's take a look at the chart below. ETH (coinglass) This surge in demand for leveraged Ethereum positions typically precedes sharp price corrections. On August 2, for example, the price dropped by more than 30% when this pattern occurred. Another risk is that by investing directly in Ethereum, the investor does not have an extra layer of security that the asset manager like BlackRock or Franklin Templeton can offer. The Bottom Line Trump's election victory and his speech brought an absurd flow of purchases for cryptocurrency ETFs. In this sense, Bitcoin reached an all-time high, raising skepticism about new purchases. Ethereum, on the other hand, is far from its all-time high. The ETH/BTC ratio is also leaning much more towards Bitcoin, however, a stronger momentum has been making Ethereum outperform Bitcoin recently. This is consistent with the idea that altseasons occur after strong Bitcoin highs. Based on this analysis, I recommend buying Ethereum. Cryptocurrencies in general should benefit from a new Trump administration, and for skeptical investors, the margin of safety seems greater in Ethereum.
