Ether futures open interest and options trading volume at all-time high - are bulls at risk?

Ether futures open interest reached a record high in May as ETH remains bullish above $3,700.
Ether futures open interest reached a record high in May as ETH remains bullish above $3,700.

Ether’s (ETH) price took a swipe at $4,000 on March 23, briefly surpassing $3,890 before correcting as the result of $46.58 million in leveraged long liquidations. Following that rally, Ethereum futures open interest reached an all-time high of $17.09 billion on May 28.

Similarly, with the ongoing consolidation above $3,700, Ethereum futures open interest remains high at $16.1 billion, according to data from Coinglass.

ETH futures open interest. Source: Coinglass

Meanwhile, monthly trading volumes of Chicago Mercantile Exchange (CME) options on Ether futures reached an all-time high in May.

According to a CCData report published on June 5, ETH options trading volume on the CME rose by 115% to $931 million. This represents a significant increase compared to April’s volume of $615.75 million and sets a record high for monthly trading volume.

“The rise in the trading activity on ETH instruments highlights the heightened institutional interest in the asset following the sudden pivot from the SEC on the spot Ethereum ETF applications in the U.S..”
Historical Monthly CME ETH Options Volumes. Source: CCData

Some analysts argue that the increasing trading activity in Ether’s derivatives market indicates increased institutional interest in ETH after the approval of spot Ethereum ETFs on May 23.

“Ether’s CME open interest is approaching all-time highs, indicating institutional interest in the ETH/BTC trade ahead of S-1 filings and an eventual launch,” said analysts at algorithmic trading company Wintermute.

In a report published on May 27, the trading firm said that the increase in Ether’s options suggested a rise in implied volatility due to heightened expectations for significant price movements. Implied volatility measures market expectations for future volatility in specific time periods based on options prices.

Market participants expect Ether’s price to become more volatile as the launch of spot Ethereum ETFs draws near.

“The market reaction to the SEC’s sudden reversal shows that investors were caught off-guard. Increasing negative Ether sentiment, which has built in the past month, evaporated. Odds for future upswings have improved, even though the price action may still be swayed by the broader market picture.”

Ether perpetual contracts share same bullishness

Similarly, other metrics, such as perpetual contracts (inverse swaps), mirrored the same bullish bias. These derivatives, also known as inverse swaps, incorporate an embedded rate typically recalculated every eight hours, signaling excessive demand for leveraged long positions.

ETH perpetual futures 8-hour funding rate. Source: Coinglass

Coinglass data indicates that ETH funding rates have essentially increased over the last couple of days to 0.0175, equivalent to 0.367% per week. Typically, in situations driven by increasing optimism, the rate remains positive. Hence, traders using perpetual contracts exhibited the same bullishness observed in the futures markets.

At the time of publication, the Ethereum price was trading at $3,843, up 1.2% over the last 24 hours, according to data from CoinGecko.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.