Ethereum Under Pressure as Analysts Advise Hedging ETH Despite Bullish Bitcoin Setup

Ethereum is facing renewed downside signals this week, as derivative data and institutional strategies indicate weakening demand — even while Bitcoin maintains a bullish macro tone.

Market Setup: Divergence Amid Strength

Ethereum recent price slide below $3,900 marks a notable divergence from Bitcoin’s relative stability around $109K.
According to a report from AInvest Research, institutional desks have begun advising clients to hedge Ethereum exposure through short positions, citing “weak capital inflows and a lack of large-scale ETH accumulation” over the past two weeks.

This advice stands in contrast to Bitcoin’s market structure, which remains resilient despite macro uncertainty.
While BTC shows rising spot accumulation and ETF inflows, ETH’s order books display declining open interest and a growing short bias in perpetual futures, suggesting that traders expect further downside before recovery.

“Ethereum isn’t broken — but capital is reallocating,” said one derivatives strategist. “Liquidity’s thinning and short hedges are climbing, which tells us smart money is defensive.”

Derivative Signals: $16B Expiry Adds Volatility Risk

A major derivatives milestone is adding pressure.
Over $16 billion in combined Bitcoin and Ethereum options are set to expire today, October 31 — one of the largest expiry events in months, according to Phemex.
Open interest around the $3,800 ETH strike suggests a volatility cluster, meaning whichever side fails to defend its level could see a sharp liquidation cascade.

ETH’s funding rates on major exchanges have flipped slightly negative — a clear signal that short positions are paying to hold leverage, aligning with the hedging narrative.
Meanwhile, BTC funding remains positive but moderate, reflecting a healthier long/short balance.

On-chain data from Glassnode also highlights diverging wallet activity: ETH exchange reserves have risen 2.4% since mid-October, while Bitcoin’s reserves have dropped to multi-year lows — indicating net accumulation for BTC but distribution pressure on ETH.

Institutional Flows: From Yield to Safety

Institutional investors appear to be rotating capital back toward Bitcoin ETFs and high-liquidity assets, while reducing exposure to ETH-based derivatives and staking products.
Analysts suggest this reflects both macro caution and regulatory fatigue, as Ethereum’s classification uncertainty in the U.S. continues to weigh on sentiment.

In particular, funds that previously sought yield through ETH staking or DeFi exposure are now prioritizing liquid, hedgeable instruments.
The result: Ethereum’s structural advantage in yield is being offset by short-term risk aversion and derivative hedging.

“Institutions are not abandoning Ethereum,” notes a report from AInvest. “They’re just managing exposure differently — Bitcoin is the core, Ethereum is the hedge.”

This narrative aligns with BTCNews.space’s earlier coverage in Bitcoin steadies near $113K as Fed policy jitters raise stakes, where we noted that institutional capital is shifting toward macro-aligned assets as the Federal Reserve’s liquidity stance evolves.

Market Impact: Short-Term Weakness, Long-Term Opportunity

For traders, the immediate takeaway is clear: ETH remains under pressure, and volatility could spike post-expiry.
However, historical data suggests that large expiry events often reset leverage and create new accumulation zones.

If ETH reclaims $4,000 with strong open interest rotation, the short-covering wave could act as a springboard into the mid-$4,200s.
Conversely, failure to defend $3,800 may trigger liquidations toward $3,600 support before a potential recovery.

Despite this tactical weakness, long-term fundamentals — such as ETH’s deflationary supply and Layer-2 adoption metrics — remain positive.
CryptoQuant data shows net ETH burned remains above issuance for the 30-day average, confirming that supply-side pressure continues to tighten even amid market volatility.

Long-Term Outlook: A Transitional Hedge Asset

Ethereum’s role may be shifting from a growth engine to a risk hedge within the crypto complex — a mirror image of Bitcoin’s institutional positioning within global macro.
This dynamic is typical during liquidity-tight cycles, where capital migrates toward perceived safety and re-enters risk assets later.

As macro liquidity stabilizes and derivatives reset, Ethereum could emerge stronger — but for now, the hedging trade dominates the narrative.

“In crypto’s risk hierarchy, Bitcoin is the lighthouse — Ethereum is the tide,” said one analyst. “When the storm hits, you watch both.”

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