Fun

Ethereum futures open interest hits 19-month high, yet ETH price weakness intensifies

News Feed - 2024-08-03 06:08:00

Marcel Pechman2 hours agoEthereum futures open interest hits 19-month high, yet ETH price weakness intensifiesEthereum derivatives metrics show increased activity, indicating higher interest but not necessarily a bullish trend.530 Total views17 Total sharesListen to article 0:00Market AnalysisOwn this piece of crypto historyCollect this article as NFTCOINTELEGRAPH IN YOUR SOCIAL FEEDFollow ourSubscribe onEther (ETH) experienced a 10% correction between July 31 and Aug. 2, retesting the $3,000 support for the first time since July 8. This movement significantly outpaced the broader cryptocurrency market, which declined by 6.8% during the same period. Despite this, Ether futures open interest rose to its highest level in seven months, leading traders to speculate whether a rally to $3,600 is the next probable move.Increased interest in Ether futures is not necessarily bullish


The increased activity in ETH futures contracts typically indicates institutional investors" interest, as open interest measures the demand for leverage. However, buyers (longs) and sellers (shorts) are always matched, so an increase in open interest does not inherently indicate a positive outlook.


Part of Ether’s decline can be attributed to the lack of net inflows into recently launched Ether exchange-traded funds (ETFs) in the United States. Although there were some inflows, particularly into BlackRock’s iShares Ethereum Trust and the Fidelity Ethereum Fund, these were offset by outflows from the Grayscale Ethereum Trust, which has existed since before the ETF conversion.


Ether’s drop below $3,000 triggered $141 million in leveraged long liquidations within 48 hours, further fueling the correction. However, this did not deter other traders from entering the market, regardless of whether they were betting on Ether’s price rising or falling. Consequently, the aggregate open interest in Ether futures increased by 5% over seven days, reaching 4.6 million ETH, the highest level since January 2023.Ether futures aggregate open interest, ETH. Source: Coinglass


To determine if buyers are demanding more leverage, one should analyze how ETH futures monthly contracts are priced relative to regular spot exchanges. In neutral markets, these derivatives should trade 5% to 10% higher, annualized, to compensate for the longer settlement period. Thus, if traders are becoming bearish, this indicator would likely fall below that threshold.Ether 3-month futures contracts annualized premium. Source: Laevitas


Ether monthly futures contracts showed modest optimism in the days preceding the spot ETF launch on July 23, with the futures premium reaching 12%. However, subsequent net outflows from spot ETFs and a broader crypto market correction caused the index to drop to 8% on Aug. 2. This level is neutral but not unusual considering the 10% price decline over 24 hours.Retail demand for ETH leveraged longs has been stagnant


To assess the leverage demand for retail traders in Ether futures, one should examine the perpetual contract (inverse swap) funding rate. Unlike monthly contracts, these instruments tend to closely follow the spot price due to their shorter settlement times. Typically, exchanges adjust risk every eight hours by charging a fee to the side demanding more leverage, meaning either longs or shorts pay the fee.


In neutral markets, the eight-hour funding rate ranges from zero to 0.016%, equivalent to 1.3% per month. During periods of heightened optimism, this rate can easily exceed 0.025%, or 2.1% per month.


Related:Ethereum’s firm $2,860 support signals path to $4,500 — DeribitEther perpetual futures 8-hour funding rate, %. Source: Laevitas


The Ether eight-hour funding rate has been relatively stable at 0.008%, equivalent to 0.7% per month, well within the neutral range. This has been the norm for the past few days, indicating that retail traders were not heavily relying on excessive leverage prior to the unexpected price drop to $3,000.


The primary driver for the increase in Ether futures open interest has most likely been the cash-and-carry trade, a neutral arbitrage strategy. Investors sell futures contracts to capture the premium while simultaneously buying the spot or ETF to hedge their risk. Therefore, according to ETH derivatives metrics, there is currently no indication that traders are anticipating a short-term price pump.


This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.# Cryptocurrencies# Ethereum# Funding# Markets# Derivatives# Futures# Grayscale# Market Analysis# Ether Price# Ethereum Price# Ethereum ETFAdd reaction

News Feed

Renowned Investor Jim Rogers Warns ‘the Worst’ Bear Market in His Lifetime Is Incoming
Renowned Investor Jim Rogers Warns "the Worst" Bear Market in His Lifetime Is Incoming Veteran investor Jim Rogers, who co-founded the Quantum Fund with billionaire investor George
Turner Wright4 hours agoFTX claims portal becomes unavailable shortly after going liveUsers affected by the bankruptcy of FTX or certain subsidiaries have the option of filing a proof-of-claim through Kroll’s online cu
1inch partners with Blockaid to combat DeFi fraud and cyber threats
Ezra Reguerra39 minutes ago1inch partners with Blockaid to combat DeFi fraud and cyber threatsBlockaid CEO Ido Ben-Natan told Cointelegraph that the product allows developers to integrate the solution through an API, avo
OKX launches Ethereum layer-2 network for lower fees & interoperability
Gareth Jenkinson7 hours agoOKX launches Ethereum layer-2 network for lower fees & interoperabilityOKX becomes the latest cryptocurrency exchange to launch an Ethereum-based layer 2 network.1543 Total views2 Total sha
OCC acting head compares crypto-asset intermediaries to corrupt bank
Derek Andersen2 hours agoOCC acting head compares crypto-asset intermediaries to corrupt bankMichael Hsu urged international cooperation and collaboration in a bid to prevent crypto firms from leveraging competition amon
Bitriver to Mine Crypto Using Excess Gas From Gazprom Neft’s Oil Extraction
Bitriver to Mine Crypto Using Excess Gas From Gazprom Neft’s Oil Extraction Russian crypto mining operator Bitriver will use electricity generated from associated gas provided by
EU crypto regulations undermined by lack of enforcement, say observers
Robert D. Knight8 hours agoEU crypto regulations undermined by lack of enforcement, say observersThe European Union’s Markets in Crypto-Assets Regulation is being phased in, but regulators have reportedly been inconsis
Blast launches Ethereum L2 mainnet unlocking $2.3B in staked crypto
Jesse Coghlan8 hours agoBlast launches Ethereum L2 mainnet unlocking $2.3B in staked cryptoThe around 180,000 Blast users have initially withdrawn $400 million from the network after its mainnet launch unlocked billions
Tax Friendly Saint Kitts and Nevis Approves Progressive Crypto Bill, Lenient Capital Gains Exemption
Tax Friendly Saint Kitts and Nevis Approves Progressive Crypto Bill, Lenient Capital Gains Exemption The island country of Saint Kitts and Nevis, located in the West Indies, rece
Ana Paula Pereira10 hours agoZetaChain raises $27M in equity round to enable chain-agnostic interoperabilityParticipants in the round include Blockchain.com, Sky9 Capital, Jane Street Capital, VistaLabs, Human Capital, V
Kik Suffers Setbacks With ‘Void for Vagueness’ Defense in SEC Case
Kik is struggling to mount a strong defense in a case brought by the U.S. Securities and Exchange Commission (SEC) over its $100 million initial coin offering. As reported last mon
Market Strategist Michael Wilkerson Believes US Inflation Could Rise to 12% by Year-End Despite Predictions of Decrease
Market Strategist Michael Wilkerson Believes US Inflation Could Rise to 12% by Year-End Despite Predictions of Decrease While several market strategists and analysts expect U.S. in