{"id":226104,"date":"2021-04-14T01:00:00","date_gmt":"2021-04-13T22:00:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/record-8b-open-interest-on-ethereum-futures-shows-the-pros-are-here\/"},"modified":"2021-04-14T01:00:00","modified_gmt":"2021-04-13T22:00:00","slug":"record-8b-open-interest-on-ethereum-futures-shows-the-pros-are-here","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/record-8b-open-interest-on-ethereum-futures-shows-the-pros-are-here\/","title":{"rendered":"# Record $8B open interest on Ethereum futures shows the pros are &#8216;here&#8217;"},"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-6a3d3feb98ef2\" 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-6a3d3feb98ef2\" 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-8b-open-interest-on-ethereum-futures-shows-the-pros-are-here\/#Not_every_short_seller_is_aiming_for_lower_prices\" >Not every short seller is aiming for lower prices<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/record-8b-open-interest-on-ethereum-futures-shows-the-pros-are-here\/#The_impact_of_futures_goes_in_both_direction\" >The impact of futures goes in both direction<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/record-8b-open-interest-on-ethereum-futures-shows-the-pros-are-here\/#Markets_eventually_normalize_on_their_own\" >Markets eventually normalize on their own<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Record $8B open interest on Ethereum futures shows the pros are &#8216;here&#8217; <\/strong>&#8221;<\/p>\n<div class=\"post-content\" data-v-5a136f3a>The price of Ether continues to push higher, and many analysts are calling for $3,000 as a short-term target. All of this &#8220;success&#8221; takes place in the face of Ether (ETH) being in a bottleneck regarding high fees, network congestion and a tense situation with miners.\u00a0<\/p>\n<p>With decentralized finance (DeFi) <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>lications taking center stage and the aggregate volumes at exchanges surpassing $4 billion per day, Ether&#8217;s price has rallied over 200% since the start of the year, marking a new all-time high at $2,300 on April 13.<\/p>\n<p>This impressive price surge caused Ether&#8217;s open interest to reach a record high of $8 billion. The figure represents 50% of Bitcoin&#8217;s (BTC) markets just two months ago. <\/p>\n<p>Some investors might say that derivatives contracts pose a risk for larger corrections due to liquidations, but one must remember that the same instrument can be used for hedging and arbitrage.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-04\/c0f72aac-5b47-44b9-b578-4f369424147f.png\" alt=\"\" title=\"\"><figcaption style=\"text-align: center;\"><em>Ether futures aggregate open interest. Source: Bybt<\/em><\/figcaption><\/figure>\n<h2><span class=\"ez-toc-section\" id=\"Not_every_short_seller_is_aiming_for_lower_prices\"><\/span>Not every short seller is aiming for lower prices<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>While the typical retail trader relies on perpetual futures (inverse swaps) primarily for short-term leverage positions, market makers and professional traders will tend to seek yields. <\/p>\n<p>This is usually achieved via &#8220;cash and carry&#8221; strategies that combine options trades. Therefore, to understand whether the current open interest represents a risk or an opportunity, investors must look at other indicators such as the funding rate.<\/p>\n<p>Massive liquidations typically occur when buyers (longs) are excessively optimistic. Hence, a 7% intraday correction forcefully terminates everyone using 15x or higher leverage. Despite making headlines, $1 billion orders would represent a mere 6% of the current average volume.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-04\/e9488995-58f5-4807-9504-cbe9d7f59922.png\" alt=\"\" title=\"\"><figcaption style=\"text-align: center;\"><em>Ether futures aggregate volume. Source: Coinalyze<\/em><\/figcaption><\/figure>\n<p>As shown above, Ether futures aggregate volumes will climb above $25 billion when additional volatility occurs. This data means the eventual liquidation impact might be even more negligible.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"The_impact_of_futures_goes_in_both_direction\"><\/span>The impact of futures goes in both direction<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Analysts tend to ignore a futures contracts&#8217; buy-side impact, especially during a bull run. No one blames derivatives for a sudden 7% price increase, although that might have accelerated the movement. This theory holds especially true considering the steep funding rate charged for longs. Traders should avoid these moments unless they&#8217;re confident that the rally will continue.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-04\/e4f5def1-779e-46e4-8f32-4c4128525db9.png\" alt=\"\" title=\"\"><figcaption style=\"text-align: center;\"><em>Ether perpetual futures 8-hour funding rate. Source: Coinalyze<\/em><\/figcaption><\/figure>\n<p>Whenever longs are the ones demanding more leverage, the funding rate will become positive. A 0.15% fee every eight hours equals 3.2% per week. Therefore, arbitrage desks and whales will buy Ether at regular exchanges and simultaneously short the futures to collect the funding rate. This trade is known as &#8220;cash and carry,&#8221; and it is not dependent on markets moving up or down.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Markets_eventually_normalize_on_their_own\"><\/span>Markets eventually normalize on their own<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>As the current futures open interest continues to rise, it reflects that markets are becoming even healthier, allowing even larger players to participate in derivatives trading.<\/p>\n<p>Its CME listing was undoubtedly an important milestone for Ether, and this is confirmed by the $8 billion open interest mark.<\/p>\n<p>The funding rate will adjust itself by welcoming more participants on the &#8220;cash and carry&#8221; side or by positions being terminated due to high costs. <\/p>\n<p>It doesn&#8217;t necessarily end with billion-dollar liquidations, but it certainly raises the risk of them occurring. Nevertheless, these same contracts could have been used to drive Ether&#8217;s price up, netting the impact over time.<\/p>\n<p class=\"post-content__disclaimer\">The views and opinions expressed here are solely those of the <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/noshitcoins\">author<\/a> 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.<\/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-8b-open-interest-on-ethereum-futures-shows-the-pros-are-here\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Record $8B open interest on Ethereum futures shows the pros are &#8216;here&#8217; &#8221; The price of Ether continues to push higher, and many analysts are calling for $3,000 as a short-term target. All of this &#8220;success&#8221; takes place in the face of Ether (ETH) being in a bottleneck regarding high fees, network congestion and&#8230;<\/p>\n","protected":false},"author":1,"featured_media":226105,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDQvM2JiNTI1Y2MtNjhiOC00MzE5LThhNmUtMzViZDA0ZjJmZTdhLmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74867,74863,74860,75012,82402,74891,75846,74939,73785],"class_list":["post-226104","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-futures","tag-market-analysis","tag-markets"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/226104","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=226104"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/226104\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/226105"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=226104"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=226104"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=226104"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}