10x Research, led by Markus Thielen, recommends shorting Ethereum to hedge Bitcoin investments amid declining institutional interest and bearish sentiment, impacting major DeFi protocols like Aave across the cryptocurrency market.
The recommendation signals a market shift favoring Bitcoin over Ethereum, affecting token liquidity, institutional flows, and amplifying short-term volatility across decentralized finance platforms.
Market Sentiment and Institutional Preference
10x Research, led by Markus Thielen, advises investors to short Ethereum amid record options expiry and declining sentiment. This recommendation is designed to support Bitcoin positions, reflecting a shift in the market-wide sentiment towards cryptocurrency investments.
The research notes influential participation from entities like Bitmine Immersion Technologies, previously active ETH buyers now retreating due to reduced retail demand. Thielen highlights Ethereum's weak asset treasury outlook as a reason for adopting this trading strategy.
Impact on DeFi and Derivatives
The immediate effect involves increased bearish flows into Ethereum, impacting derivatives and on-chain metrics. DeFi protocols such as Aave and Uniswap are experiencing pressure as Total Value Locked (TVL) and liquidity face downward trends amidst these market conditions.
The financial implication emphasizes a strong institutional preference for Bitcoin, demonstrated by record $50 billion BTC options interest. The changing approaches reflect a broader risk-off sentiment impacting Layer 1/2 tokens and DeFi markets.
Volatility and Market Dynamics
Historical trends indicate that such large options expiries often result in notable volatility for underlying assets. The divergence in asset performance typically sees Bitcoin outperforming in uncertain market conditions, which aligns with the current bearish sentiment towards Ethereum.
Markus Thielen, Founder, 10x Research, stated, “Current market data suggests a pronounced shift in sentiment, with reduced buying pressure on Ethereum.”
Potential outcomes include shifts in market dynamics, regulatory adjustments, and technological advancements in the crypto space. Historical data underscores these volatility patterns, as previous instances have prompted scenarios of sharp corrections or eventual market rebounds.