Ethereum futures data shows that professional traders believe the next stop for the best altcoin ETH is $ 3.500.
Open Positions in Ethereum
When Ethereum (ETH) broke its all-time record with $ 2,800 on April 29, open positions were also created in futures. The figure of $ 8.5 billion indicates a monthly increase of 52% and shows strong trading activity behind the rapid price increase.
Some analisdollars may reject Ethereum derivatives, considering that CME’s futures have a $ 355 million open position compared to Bitcoin’s $ 2.4 billion. However, Ether contracts were only launched a few months ago. Both FTX and Deribit require 100% full KYC for their clients, and these markets have a total open position in ETH of $ 2 billion.
Accordingly, the open position for silver futures currently stands at $ 22.6 billion. The precious metal has decades of trading history and a market value of $ 1.4 trillion. However, a simple analysis of the number of outstanding contracts doesn’t really help as they can be used for hedging.
Growth in Futures is Positive But Not a Guaranteed Uptrend Indicator
There are several derivative metrics that should be reviewed to assess whether the market is showing a bullish trend. The first is the futures premium, which measures the price difference between the futures contract prices yellow and the regular spot market.
3-month futures should generally be traded at an annual premium of 10% to 20% and this should be interpreted as a lending rate.
As seen in the chart above, the futures premium of ETH went wild in mid-April and peaked at 45% on an annual basis. Although the FOMO of the traders played a role, this also signaled extreme optimism. Professional traders mostly use monthly futures contracts, while permanent contracts are the instrument that retail investors resort to.
Retail Investors Fixed Currently
Permanent contracts are also known as reverse swap and these contracts usually have a funding rate that is applied every 8 hours. This fee increases as long products (buyers) use higher leverage, so their accounts are slowly depleted. When a retail buying frenzy occurs, the fee can go up to 5.5% per week.
As seen in the chart above, the 8-timollarsik funding rate recently reached 3.8% per week with 0.18% on April 14th. While this certainly adds to the base of the fairly optimistic monthly futures, the impact has completely subsided as the funding rate has cracked over the past few days.
These data show that compared to retail investors, professional traders are more bullish on Ethereum because they are currently holding the 3-month base at 25% per year. This rate is higher than most stablecoin lending services offer, which means that buyers in long positions (buyers) are willing to pay a premium to keep their positions open.