Investment strategy under the favorable conditions of ETH ETF: Leverage ETH or bet on altcoins?

Written by: THOR

Compiled by: Shenzhen TechFlow

Introduction

ETH ETF is about to be launched. While most are speculating on the short- and long-term impacts of these products, another question is: can this catalyst for ETH be captured by increasing exposure to leveraged ETH beta?

ETH beta refers to altcoins within the Ethereum ecosystem that should theoretically serve as leveraged exposure to ETH. Common examples include LDO or ENS, altcoins considered by traders to be more volatile relative to ETH itself. However, lately the term “ETH beta” has mostly been considered a meme due to the overall poor performance of altcoins. Selecting an ETH-related altcoin for leveraged exposure is like looking for a needle in a haystack, often resulting in traders and investors underperforming ETH over longer time frames.

So, is it different this time? With the ETH ETF launching, is the best strategy to bet on altcoins with higher beta relative to ETH? Today’s article will explore this issue from a quantitative perspective.

Price Performance

TOTAL3 (altcoin market cap) relative to ETH market cap is approximately 1.48. This ratio has only been this low on a handful of occasions since 2020, suggesting that ETH is outperforming most altcoins.

图表: hyphin；来源 使用 Datawrapper 创建

This chart can be interpreted from several angles. First, these altcoins have historically typically rebounded at this level. Given the recent high degree of bearish sentiment towards altcoins, this could be a potential scenario. However, this chart shows a multi-year downward trend, indicating that it is difficult to find altcoins that can outperform ETH. Additionally, while altcoin market capitalization may increase, prices may decline due to low circulation and large unlocks of many tokens. Therefore, it is more difficult to find reliable "ETH beta".

A sample of tokens analyzed as potential ETH betas include the following:

[L2's]

OP, ARB, MANTA, MNT, METIS, GNO, CANTO, IMX, STRK

[Alt ​​L1's]

SOL, AVAX , BNB, TON

[DeFi]

MKR, AAVE, SNX, FXS, LDO, PENDLE, ENS, LINK

[Memes]

PEPE, DOGE, SHIB

Zoom in, the chart below shows this year The performance of ETH and these four token categories since (past 198 days).

L2 Annual Performance Percentage

图表：Thor Hartvigsen；使用 Datawrapper 创建

Notably, no L2 token has outperformed ETH during the year, with top performer GNO up 34%, while ETH is up 44%. Among the worst performers were MANTA, STRK and CANTO, all down more than 60% this year.

Top Alt L1 Annual Performance Percentage

图表：Thor Hartvigsen；使用 Datawrapper 创建

Top Alt L1 tokens performed much better, with both TON and BNB significantly outperforming ETH. AVAX is the only coin to decline this year.

DeFi Annual Performance Percentage

图表：Thor Hartvigsen；使用 Datawrapper 创建

Of the 8 DeFi tokens in this basket, 3 outperformed ETH, namely PENDLE (+254%), ENS (+163%), and MKR ( +78%). The remaining five are all down this year, with the worst performer being FXS, down 73%.

Meme Token Year-To-Date Performance Percent

图表：Thor Hartvigsen；使用 Datawrapper 创建

Meme tokens have been a standout performer in 2024, and this is especially evident among the largest Ethereum-native meme tokens. Pepe had the biggest gains, rising 708%; SHIB rose 74%; DOGE rose 31%. + For example, random DEX tokens on Solana or Sui will have a lower correlation to ETH than ERC-20 tokens on the Ethereum network.

The above-mentioned individual performance year-to-date is of great reference value. Although past performance cannot guarantee future results, there may be some signals. If we are to analyze whether these tokens are truly exposed as leveraged betas of ETH, rather than just individual actions, we need to dig deeper. There is no perfect way to model this, and crypto markets are far from efficient. Therefore, the data obtained must be treated with caution. However, one way to study this behavior is to look at the correlation between these altcoins and ETH.

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