The open interest in Ether (ETH) futures has reached an all-time high of 9 million ETH as of January 17. This significant milestone comes after a 10% rise in open interest over a two-week period, indicating growing demand for leveraged positions. Despite Ethereum testing the $3,000 support on January 13, this trend has fueled speculation among traders about whether it indicates increasing bullish sentiments or sets the stage for increased market volatility.
Approximately 54% of the cryptocurrency market is controlled by Binance, Bybit, and Gate.io, while the Chicago Mercantile Exchange (CME) holds about $3.2 billion, accounting for only 10% of the open interest. This disparity suggests that Ethereum has a lower level of institutional adoption compared to Bitcoin (BTC), as CME accounts for 28% of Bitcoin’s open interest.
Increases in open interest don’t automatically mean the market is bullish because for every buyer there’s a seller in futures contracts. To gauge the overall sentiment, traders scrutinize the expenses associated with holding leveraged positions, particularly the futures premium.
Futures premium and options reflect market confidence
1) On January 17th, the monthly ETH futures annualized rate was 12%, rising from 10% on January 12th. This figure, usually between 5% and 10% during normal market conditions, indicates increased optimism about Ether’s potential recovery following a 12% underperformance in the cryptocurrency market over the past month.
On January 17th, the difference in price between bullish and bearish bets for Ether options contracts, as indicated by a 25% delta skew, stood at -4%. This suggests that selling put options is slightly cheaper compared to buying call options. However, it’s important to note that this skew remains within the neutral range of -6% to +6%, meaning the market is neither heavily favoring bullish nor bearish bets.
As a researcher, examining these indicators, I am observing signs of resilience in the confidence among professional Ether traders. However, it’s essential to delve deeper and understand the demand for leveraged trading among retail traders in Ether perpetual contracts or inverse swaps. These financial instruments, known for their swift settlement periods, closely track spot prices. The funding rate serves as a crucial clue, revealing which party—long or short positions—is requesting more leverage at any given time.
Currently, the indicator is at 0.9% monthly, consistent with last week’s figure. This percentage falls within the neutral range of 0.5% to 1.9%. This rate suggests a market sentiment that’s neither overly optimistic nor pessimistic, offering potential for further price increases in the future.
Macroeconomic factors and World Liberty Financial’s role in boosting ETH sentiment
In simple terms, the larger economic context has boosted trust in ETH markets too. The lower-than-anticipated inflation figures from December sparked optimism throughout financial markets, suggesting that the Federal Reserve may make several interest rate reductions in 2025. A more relaxed monetary policy usually favors cryptocurrencies because lower rates decrease the appeal of less risky investments.
As a crypto investor, I find myself feeling increasingly optimistic about the market, given the recent involvement of World Liberty Financial – a cryptocurrency project with strong connections to the incoming US President, Donald Trump. Notably, this firm has been actively investing in various cryptos, including Ethereum as late as December 2024. This strategic move aligns with President-elect Trump’s public support for blockchain technology and digital assets, which I believe could have a profound impact on the crypto market in the coming years.
In the past month, ETH has experienced a decline of 11%, but its resilience suggests it’s well-positioned for an upcoming surge. There’s a strong possibility that it could reach $4,000 in the near future, bolstered by increasingly positive trader attitudes and growing institutional involvement.
In this piece, we aim to provide you with a broad understanding of the topic at hand; however, it’s essential to note that the information shared is for general knowledge purposes only. It is neither intended nor should be interpreted as legal or financial advice. The author’s personal views, ideas, and opinions expressed here may not align with those held by CryptoMoon.
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2025-01-17 23:12