For years, the crypto market has followed a familiar rhythm—Bitcoin rallies first, altcoins follow, and then both retrace together. But this time, the script seems to be changing. A growing number of Bitcoin-focused traders are now using Ethereum as a hedge, betting against it while staying long on BTC.
The latest data and institutional research suggest this unusual setup could mark a deeper market shift: one where Bitcoin’s structural strength becomes the defensive play, while Ethereum struggles to hold its once-dominant narrative.
In Bitcoin’s recent “risk-off” phase, traders have become increasingly cautious. Instead of turning to smaller altcoins for high-risk opportunities, many are seeking ways to reduce exposure while staying positioned for a broader Bitcoin recovery.
A report from 10x Strategy outlines how shorting Ethereum has become a smart hedge for Bitcoin investors. The reasoning is straightforward — Ethereum’s fading institutional momentum and weakening fundamentals make it a more vulnerable asset during periods of market uncertainty.
Historically, traders have rotated between BTC and altcoins, using smaller tokens to amplify returns. But this cycle looks different. Capital is moving out of the crypto sector altogether and into traditional equities. With major U.S. stocks like Apple (AAPL) hitting record highs near $277, institutional investors appear to be prioritizing stability over speculation.
For much of the year, Ethereum’s institutional narrative revolved around its DAT model—a mechanism popularized by BitMine Immersion (BMNR) that allowed large investors to accumulate ETH at reduced costs before distributing it to the public at a premium.
The strategy worked for a while. BMNR became the face of institutional Ethereum accumulation, holding more than 3 million ETH in its reserves. However, as macro conditions tightened and crypto liquidity cooled, cracks began to appear.
BMNR’s stock price has fallen 10.17% this quarter, reflecting growing investor unease. Meanwhile, traditional equity markets continue to post strong performance, drawing capital away from digital assets.
According to 10x Strategy’s report, the weakening DAT fundamentals have become a major drag on Ethereum’s sentiment. Retail investors who once looked to Ethereum for exposure to institutional flows are now sitting on losses, leading to declining enthusiasm and volume.
In this environment, shorting ETH is increasingly seen as a defensive move—an efficient way to protect long Bitcoin positions while betting on Ethereum’s relative underperformance.
While Ethereum struggles, Bitcoin remains remarkably resilient. Despite occasional dips below the $110,000 mark during October’s market pullback, BTC’s overall structure has held firm.
Analysts note that Bitcoin continues to attract both institutional and retail inflows, supported by ETF participation and its role as the most liquid digital asset. Altcoin trading volumes, on the other hand, have stayed subdued, signaling a broader rotation away from speculative assets.
From a technical standpoint, Ethereum’s performance has diverged sharply from Bitcoin’s. For the first time since the first quarter, ETH has posted a deeper drawdown, currently trading nearly 50% weaker relative to Bitcoin.
This shift underscores how traders are favoring Bitcoin’s stability. The trend suggests that while Ethereum remains a key player in the decentralized finance ecosystem, its price action is losing alignment with Bitcoin’s bullish momentum.
According to 10x Strategy’s analysis, using short ETH positions as a hedge for Bitcoin exposure is gaining traction among sophisticated traders. The logic mirrors traditional finance tactics where investors offset risk by shorting weaker assets in the same sector.
With Ethereum’s institutional narrative weakening and retail sentiment fading, ETH is becoming a tactical short position rather than a complementary hold to BTC.
The setup works because of the structural divergence between the two assets. Bitcoin continues to benefit from strong long-term fundamentals — including its capped supply, expanding ETF flows, and increasing global adoption. Ethereum, meanwhile, faces near-term challenges tied to liquidity, governance, and the slowdown of institutional activity.
Traders using this hedge are effectively betting that Bitcoin will outperform Ethereum, regardless of broader market direction. If BTC rallies, the ETH short loses less ground than the BTC long gains. If the market dips, the ETH short cushions the downside.
This growing divergence may mark the second major turning point of the current cycle — the first being the early-year surge that saw Bitcoin lead the broader market higher.
Now, with Ethereum underperforming, traders are reevaluating how altcoins fit into a maturing crypto landscape. The “high-risk, high-reward” playbook that defined previous bull runs is being replaced by more sophisticated strategies focused on risk-adjusted returns.
If Bitcoin continues to consolidate above the $100,000 range while Ethereum weakens further, shorting ETH could become one of the dominant hedging strategies of the next quarter.
At the same time, this shift raises important questions about Ethereum’s position in the institutional ecosystem. If traditional investors continue migrating toward Bitcoin ETFs and regulated products, Ethereum’s recovery may depend more on technological milestones and real-world utility than on speculative flows.
For now, Bitcoin’s resilience and Ethereum’s fading momentum are shaping a new dynamic in the digital asset market. The 10x Strategy report captures what many in the space are beginning to notice — Bitcoin is no longer just the leading crypto; it’s becoming the benchmark for capital preservation, while Ethereum’s role evolves into a tactical hedge.
If this trend continues, the current cycle could redefine how traders manage risk between the two largest cryptocurrencies — and signal the start of a more mature, strategically driven phase for the entire market
A finance graduate, Maheen Hernandez has been drawn to cryptocurrencies ever since Bitcoin first emerged in 2009. Nearly a decade later, Maheen is actively working to spread awareness about cryptocurrencies as well as their impact on the traditional currencies. Appreciate the work? Send a tip to: 0x75395Ea9a42d2742E8d0C798068DeF3590C5Faa5
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