As Ether (ETH) made an all 2,800 all-time on April 29, so did their future open interests. The figure of 8 8.5 billion marks a monthly increase of 52% and shows strong commercial activity behind the meteoric price increase.
Some analysts could rule out ether derivatives, considering that CME’s future holds $355 million in open interest compared to Bitcoin’s 2.4 billion. However, Ether contracts were only released a couple of months ago. Both FTX and Deribit require 100% full KYC for their clients, and these markets have a combined open interest of E2 billion in ETH.
For this in perspective, open interest on silver futures currently stands at $22.6 billion. The precious metal has decades of trading history and a market capitalization of $ 1.4 trillion. However, a simple analysis of the number of pending contracts is not really useful, as they can be used for hedging.
Growth in futures is positive, but not a guaranteed bullish indicator
To assess whether the market is leaning bullish, there are a couple of derivatives metrics to review. The first is the futures premium (also known as the basis), which measures the price gap between futures contract prices and the regular spot market.
3-month futures should generally trade with an annualized premium of 10% to 20%, which should be interpreted as a loan rate.
As the chart above shows, ETH futures premium went crazy in mid-April, peaking at 45% annualized. Although the FOMO of traders played a role, this also signaled extreme optimism. While professional traders use monthly futures contracts more frequently, perpetual contracts are the benchmark instrument for retail investors.
Retail investors are flat right now
Perpetual contracts are also known as reverse swaps, and these contracts have a financing rate that is usually charged every 8 hours. This fee increases as longs (buyers) use higher leverage, so their accounts drain slowly. When a retail shopping frenzy occurs, the rate can reach up to 5.5% per week.
These data suggest that, compared to retail investors, professional traders are more bullish on Ether, as the 3-month base currently stands at 25% per year. This rate is higher than most stablecoin lending services, which means longs (buyers) are willing to pay a premium to keep their positions open.