In the past 30 days, the Ether (ETH) price has decoupled from Bitcoin (BTC), growing 67.5% while the leading cryptocurrency price has barely moved. Ether’s all-time high of $ 3,605 on May 5 was responsible for the open positions on futures on the asset’s growth to $ 10 billion.
This move raises some crucial questions as the dominance of the Bitcoin derivatives markets currently appears to be in question. On May 4, Ether’s aggregate futures volumes surpassed Bitcoin’s for the first time in history.
Volume data from Coinalyze shows that CME Bitcoin futures were worth $ 2.6 billion, along with CME Ether futures worth $ 1.1 billion on May 4th. However, the total volume of Ether was $ 87 billion versus $ 81 billion for Bitcoin.
Some might argue that volumes are not as relevant as open interest, which is a fair estimate. Open Interest represents the total number of contracts regardless of whether they were traded on a particular date. With that in mind, Bitcoin still has Ether’s $ 10 billion futures open interest.
The graph above shows a staggering 117% increase in Ether futures in two months. It’s also worth noting that CME’s contracts reach an outstanding interest of $ 460 million, a seven-fold increase since March.
The rising futures volume of Ether signals increasing interest from traders
To assess whether the market is bullish, one should analyze its premium. The premium measures the price gap between the futures contract prices and the regular spot market. This indicator is commonly referred to as the base and should show an annualized premium of 10% to 20%.
The stable lending rate on coins is the main reason for this discrepancy as the futures participants withhold settlement by opting for derivative contracts.
The graph above shows that Ether’s futures premium peaked at 45% in mid-April and has since normalized near 25%. This data is very encouraging as it suggests that despite the fact that Ether price has hit an all-time high, there is no extreme optimism.
While some analysts interpret this data as a “glass half full,” others might say it represents a lack of conviction from professional traders. Regardless of your point of view, it is important to consider the effects of carry trading that negatively affect the base indicator.
Investors seeking fixed income trading will short Ether Futures contracts while buying Spot Ether at the same time.
Overall, there appears to be healthy growth in Ether’s futures markets no matter how you interpret the data.
As for a possible Bitcoin open interest flip, this still seems a long way off. Either way, the general increase in cryptocurrency derivatives is beneficial to the market.
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