2 Critical ETH Price Metrics Show Pro Traders are Boosting Value
Futures open interest for Ethereum hit a record of $8.5 billion. Pro traders believe that ETH will reach a new high of $3500 soon.
On April 29, Ether (ETH) reached an all-time high of $2800. This growth also pushed the interest of the open future for the crypto, with the new figure standing at $8.5 billion. This is a 52% growth, which depicts an increase in trading activity contributing to the price hike.
Ether derivatives are not very popular with analysts and traders. CME Group, a futures and trading option, only has $355 million in open interest, although it was launched a few months back. This is a small figure compared to Bitcoin’s open interest, which stands at $2.4 billion.
Not yet a Bullish trend
Analysts believe that Ethereum is not yet in a bullish state. There are factors used to evaluate whether a market is shifting to a bullish state. The main factor used is a futures premium, which measures a price gap between future contracts and current market prices.
If an asset is in a bullish state, the futures premium should be 10% to 20%. This is known as a lending rate. ETHs futures premium for April stood at 45%. This is too high, which could be a sign of too much optimism.
Professional Traders are more bullish than Retail Investors
Professional traders usually go for monthly futures contracts, while on the other hand, retail investors go for perpetual contracts or inverse swaps. With perpetual contracts, retail investors are charged a funding rate after every 8 hours. The funding rate increases every time buyers on long speculation leverage for higher and their accounts are charged regularly.
When retail-trading activities are incredibly high, the funding rate can increase to a maximum of 5.5% every week. In mid-April, the 8-hour funding rate for perpetual contracts reached around 3.8% per week. This high fee caused higher optimism for monthly futures. However, the funding rate has been corrected, and it has now gone back to the standard rate.
The increase in the funding rate in mid-April shows that retail investors are less bullish on Ether than professional traders. The 3-month futures basis currently stands at 25% annualized. This is relatively higher compared to other similar platforms. This means that buyers who want to speculate for the long term are now more willing to make a premium payment to maintain their open positions.