Ether has flipped bitcoin for the first time on the world's largest options market.
Crypto-analysts see this as the latest signal that ethereum (USD-ETH) may soon overtake bitcoin in terms of market capitalisation rankings.
At present bitcoin (USD-BTC), which fell on Tuesday by almost 2% to $22,800 (£18,077), has always topped cryptocurrency rankings by market capitalisation.
As of the time of writing, bitcoin has a market cap of approximately $436bn compared with ethereum's $190bn.
Ethereum, though, has followed bitcoin's slide: ether fell nearly 6% in the last 24 hours.
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On Monday, the world's largest options exchange, Deribit, saw $5.7bn locked into ether options contracts.
This is 32% higher than the $4.3bn locked into open bitcoin options trades on the same market.
There are a lot more traders interested in trading ether over bitcoin ahead of the coming ethereum merge in September.
The long-awaited 'merge' of ethereum will see the network become a fully 'proof of stake' blockchain.
The merge is scheduled for September and will make ethereum a low-energy usage blockchain, as it will have abandoned the high-energy intensive 'proof of work' method for verifying transactions that was invented by Satoshi Nakamoto with the founding of bitcoin.
The merge will not only dramatically improve ethereum's environmental impact, it will also pave the way for cheaper and more efficient transactions on the network.
Ethereum's merge to proof of stake could open the blockchain to inward investment from institutional finance, which remained cautious in the past because of the carbon footprint associated with proof of work.
One of the world's largest cryptocurrency exchanges, Coinbase (COIN), forecasts that US domestic institutional clients will wish to generate yield by staking ether after the merge.
Coinbase Prime now provides institutions with an end-to-end staking experience.
Clients can create a wallet, decide how much to stake, and initiate staking with a Coinbase Prime account.
Staking 32 ether sets up an ethereum node, and is the equivalent of a mining operation on the bitcoin blockchain.
Staking ethereum, in the proof of stake consensus mechanism, allows the node to verify transactions and take rewards through generous yields.
In ethereum 2.0, ether will become a deflationary cryptocurrency with the annual issuance of the cryptocurrency being slashed by 90%.
Investors are bullish on ethereum forecasting that a successful merge to a proof of stake consensus mechanism and the restricting of yearly issuance will appreciate the price of its native token, ether. Essentially, this means less ether tokens to go around.
How options work
On the Deribit cryptocurrency options market the amount of ether call options – the right to buy ether at a specific price within a given time period – has increased.
These call options have not been equally matched by corresponding put options – the right to sell ether at a specified price at a later date.
This increased demand for calls over puts has been seen as an indicator that ethereum could make a bullish move. Whereas, an increase of put options provides protection against price drops.
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Traders are lining up a lot of ether call options for a possible bull-run on ethereum after the merge.
The sliding put-call open interest ratio has been seen as further evidence that the 'flippening' may happen – where ethereum overtakes bitcoin in terms of overall market cap.
The term refers to the hypothetical moment when ethereum overtakes bitcoin as the world's largest cryptocurrency in overall value.
Crypto investor and influencer Ben Armstrong on Tuesday tweeted: "We are watching the early stages of the Flippening $ETH."
With the merge looming in just over one month, many crypto analysts are stating that the flippening is getting closer by the day.
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