Interest In Ether Derivatives Have Surged By 100% In Three Months

ETH price surge has attracted interest from investors towards various ETH derivatives. Glassnode data shows that institutional investments in ETH futures reached new peak levels yesterday, surging past the previous peak level of $11.28B to $11.7B.

Carry Trading And Ether Futures

A top executive with, Gustavo De La Torre, said that the value has increased by 100% between June and August this year, indicating investment inflows into that sector. De La Torre further said, “Ether continues to rally, which indicates that most investors are buying in anticipation of a sustained bullish run.”

A top executive with another leading crypto exchange, Patrick Heusser, said open interest will likely rise as carry trades opportunities open up. This type of trade involves buying digital assets at the current market price and selling its futures on the premium market to make gains from the difference.

The trader using this trading strategy makes almost no risk gains because the futures premium loses value when expiry is close but rises with the market price. Traders deploy this trading strategy when futures trade at a premium relative to the spot price.

Futures Premium May Not Attain Previous Heights Again

A skew analytics data reveal that quarterly futures premiums on major exchanges have risen by 7% year-on-year in the past month. But the market isn’t saturated yet as premiums are much lower than the 45% highs recorded in the first quarter of this year.

However, some analysts opined that premiums might rise to such levels again even when the market is on a strong rally because these leading exchanges do not provide huge leverages again. Despite trading close to $1,850 two months ago, Ether has rallied to over $4K this month. Heusser remarked that there are good spot buying in Ether as the EIP-1559 update is starting to affect.

This proposal was part of Ethereum’s last upgrade. Following the implementation of the upgrade, some ETH were burned to limit token supply and increase Ether’s value. A Cryptocompare data showed that Ether’s 24-hour net emission is now at -334, which isn’t up to bitcoin’s own.

Institutional Investors Predict That ETH Will Rise To $25K Soon

Leading crypto analysts from Standard Chartered bank have predicted that ETH will offer greater profits than bitcoin, but it also poses higher risks than the king coin. They also predicted ETH price might soon reach 425K based on structural considerations and its use cases. Despite losing 21% yesterday, 90% of institutional investors remain bullish on the second-largest cryptocurrency.

Most of them agree that the ongoing aggressive buying on ETH has caused its futures contracts to trade at a high premium. This scenario is perfectly set up for a price correction that allows traders to trade the dip. The sharp rise in Ethereum transaction fees is one other cause for the drop. Ethereum CEO Vitalik Buterin also stated that the increasing number of NFTs on the network is causing congestion. But he and his team are creating a solution to solve the problem.