Ethereum: Significant Rise in Open Interest – What is Behind the Surge?
ETH activity has seen a significant boost since the events in Shanghai, while BTC activity has remained stagnant.
Specifically, the open interest in CME’s ETH contracts has surged by 39% between April 10 and April 17 following the Shanghai events.
This surge is noteworthy, given that CME’s ETH OI has only been higher on two previous occasions: during the FTX collapse in November and at the end-of-year settlement in 2022. It is possible that institutions are rotating their exposure.
In contrast, the developments in CME’s BTC futures have been negative, with a decline of 1.5% in the past week. This could imply that traders are now shifting their focus toward ETH after the upgrade. This shift could suggest that ETH could exhibit strength compared to BTC in the upcoming period.
However, it is worth noting that the recent OI surge coincided with the recovery of ETHBTC from 0.062 ETHBTC to 0.07 ETHBTC. This indicates that the surge in OI could be a significant factor contributing to the strong momentum of ETH over the past week.
READ MORE: Bitcoin: Price Continues to Crash Dragging the Whole Crypto Market Along
The futures premium has also increased significantly due to the OI surge. Specifically, the futures basis in CME’s Ether futures has risen from 1.8% to 4.3% in the days after Shanghai.
The surge in open interest could be motivated by the need to hedge staked exposure. Once stakers can withdraw funds, potential arbitrages and yield strategies may emerge.
This could lead to proprietary funds being tempted to trade the discrepancies. For instance, if ETH futures trade at an annualized basis of 1.8% while the staking yield is at 4%, traders may be interested in exploiting the differences.
It will be interesting to monitor whether the ETH futures basis will drift toward the expected yields earned from the beacon chain in the future.
At the time of writing ETH is trading at $1,910 – down more than 9% on the weekly chart.
Alexander Stefanov
Reporter at CoinsPress
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.
