{"id":172043,"date":"2021-02-06T04:29:51","date_gmt":"2021-02-06T01:29:51","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/record-6-5b-futures-open-interest-signals-traders-are-bullish-on-ethereum\/"},"modified":"2021-02-06T04:29:51","modified_gmt":"2021-02-06T01:29:51","slug":"record-6-5b-futures-open-interest-signals-traders-are-bullish-on-ethereum","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/record-6-5b-futures-open-interest-signals-traders-are-bullish-on-ethereum\/","title":{"rendered":"# Record $6.5B futures open interest signals traders are bullish on Ethereum"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a4026cb9ce2f\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a4026cb9ce2f\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/record-6-5b-futures-open-interest-signals-traders-are-bullish-on-ethereum\/#Sellers_were_not_liquidated_by_the_move_to_1750\" >Sellers were not liquidated by the move to $1,750<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Record $6.5B futures open interest signals traders are bullish on Ethereum <\/strong>&#8221;<\/p>\n<div class=\"post-content\" data-v-5a136f3a>Ether (ETH) price has rallied by 33% over the last five days and data shows that as this occurred some buyers began to use excessive leverage.\u00a0<\/p>\n<p>Although this is not necessarily negative, it should be considered a yellow flag as a higher premium on futures contracts for short periods is normal.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-02\/08d69934-f184-4362-b517-591fb740b10e.png\"><figcaption style=\"text-align: center;\"><em>ETH\/USD 4-hour chart. Source: TradingView<\/em><\/figcaption><\/figure>\n<p>Although Ether\u2019s upward movement has been going for an extended period, it was only in February that Ether finally broke the $1,500 psychological barrier and entered price discovery mode.<\/p>\n<p>To assess whether the market is overly optimistic, there are a few essential derivatives metrics to review. One is the futures premium (also known as basis), and it measures the price gap between futures contract prices and the regular spot market.<\/p>\n<p>The 3-month futures should usually trade with a 6% to 20% annualized premium, which should be interpreted as a lending rate. By postponing settlement, sellers demand a higher price and this creates a price difference.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-02\/94b8440b-8030-477f-b3c0-42c04135b712.png\"><figcaption style=\"text-align: center;\"><em>ETH Mar. 26 futures premium. Source: <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"http:\/\/digitalassetsdata.com\/\"><em>NYDIG-Digital Assets Data<\/em><\/a><\/figcaption><\/figure>\n<p>The above chart shows the Ether futures premium shooting above 5.5%, which is usually unsustainable. Considering there&#8217;s less than 49 days to the Mar. 26 expiry this rate is equivalent to a 55% annualized basis.<\/p>\n<p>A sustainable basis above 20% signals excessive leverage from buyers and creating the potential for massive liquidations and market crashes.<\/p>\n<p>A similar movement h<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>ened on Jan. 19 as Ether broke $1,400 but failed to sustain such a level. That situation helped trigger the liquidations that followed and Ether plunged 27% over the next two days.<\/p>\n<p>A basis level above 20% is not necessarily a pre-crash alert but it reflects high levels of leverage usage from futures contract buyers. This overconfidence from buyers only poses a greater risk if the market recedes below $1,450. That was the price level when the indicator broke 30% and reached alarming levels.<\/p>\n<p>It is also worth noting that traders sometimes pump up their use of leverage in the midst of a rally but also purchase the underlying asset (Ether) to adjust the risk.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Sellers_were_not_liquidated_by_the_move_to_1750\"><\/span>Sellers were not liquidated by the move to $1,750<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Those betting on $2,000 Ether should be pleased to know that open interest has been increasing all throughout the recent 33% rally. This situation indicates short-sellers are likely fully hedged, taking benefit of the futures premium, instead of effectively expecting a downside.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-02\/867144a9-0674-4fd8-81bb-452925abf214.png\"><figcaption style=\"text-align: center;\"><em>ETH futures aggregate open interest in USD terms. Source: Bybt.com<\/em><\/figcaption><\/figure>\n<p>This week the open interest on Ether futures reached a record $6.5 billion, which is a 128% monthly increase.<\/p>\n<p>Professional investors using the strategy described above are essentially doing cash and carry trades which consist of buying the underlying asset and simultaneously selling futures contracts. <\/p>\n<p>These arbitrage positions usually do not present liquidation risks. Therefore, the current surge in open interest during a strong rally is a positive indicator.<\/p>\n<p><em>The views and opinions expressed here are solely those of the <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/noshitcoins\"><em>autho<\/em><em>r<\/em><\/a><em> and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.<\/em><\/p>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/div>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/record-6-5b-futures-open-interest-signals-traders-are-bullish-on-ethereum\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Record $6.5B futures open interest signals traders are bullish on Ethereum &#8221; Ether (ETH) price has rallied by 33% over the last five days and data shows that as this occurred some buyers began to use excessive leverage.\u00a0 Although this is not necessarily negative, it should be considered a yellow flag as a higher&#8230;<\/p>\n","protected":false},"author":1,"featured_media":172044,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDIvNmQ1NTJlM2MtNTY2My00YTY1LWJiNWEtNDJiODVkOWE0ODg4LmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74867,74863,74860,75012,82402,74891,81210,75846,73785],"class_list":["post-172043","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-altcoin","tag-cryptocurrencies","tag-cryptocurrency-exchange","tag-derivatives","tag-ether-price","tag-ethereum","tag-ethereum-options","tag-futures","tag-markets"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/172043","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=172043"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/172043\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/172044"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=172043"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=172043"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=172043"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}