The price of Ethereum (ETH) plummeted to $4,000 on March 23, briefly exceeding $3,890 before correcting as a result of $46.58 million in leveraged buy liquidation. Following this rally, Ethereum futures open interest reached an all-time high of $17.09 billion on May 28.
Likewise, Ethereum futures open interest remains high at $16.1 billion amid consolidation above $3,700, according to data from Coinglass.
Meanwhile, monthly trading volume for Chicago Mercantile Exchange (CME) options on Ethereum futures hit an all-time high in May.
According to a CCData report released on June 5, CME’s ETH options trading volume increased 115% to $931 million. This is a significant increase compared to April’s trading volume of $615.75 million and marks the highest monthly trading volume.
“The increase in trading activity for ETH products highlights the heightened institutional interest in the asset following the SEC’s abrupt turn on the Ethereum ETF application scene in the US.”
Some analysts argue that increased trading activity in the Ethereum derivatives market indicates increased institutional interest in ETH following the approval of a spot Ethereum ETF on May 23.
“CME open interest for Ether is approaching all-time highs, indicating institutional interest in ETH/BTC trading ahead of the S-1 filing and final launch,” analysts at algorithmic trading firm Wintermute said.
In a report published on May 27, the trading firm said that the increase in Ethereum options indicates an increase in implied volatility as expectations of significant price movements rise. Implied volatility measures market expectations of future volatility over a specific period of time based on option prices.
Market participants expect the Ethereum price to become more volatile as the launch of the spot Ethereum ETF approaches.
“The market’s reaction to the SEC’s sudden reversal shows that investors were caught off guard. The negative ether sentiments that had built up over the past month have evaporated. “Although price action may still be swayed by broader market conditions, the potential for further upside has increased.”
Ether perpetual contracts share the same strength.
Likewise, other indicators such as perpetual contracts (reverse swaps) reflected the same bullish bias. These derivatives, also known as inverse swaps, typically contain implied interest rates that are recalculated every eight hours, indicating excessive demand for leveraged long positions.
According to Coinglass data, the ETH funding rate has increased over the past few days to 0.0175, essentially equivalent to 0.367% per share. Typically, in situations of rising optimism, the ratio remains positive. Therefore, traders using perpetual contracts showed the same strength observed in the futures market.
At the time of publication, Ethereum was trading at $3,843, up 1.2% over the past 24 hours, according to data from CoinGecko.
This article does not contain investment advice or recommendations. All investment and trading activities involve risk and readers should conduct their own research when making any decisions.