Ether's Rally to 25-Month High on DeFi Boom Drives Record Demand for Derivatives

Record open interest in ether derivatives suggests the recent price rally has legs.

AccessTimeIconAug 15, 2020 at 6:34 p.m. UTC
Updated Sep 14, 2021 at 1:48 p.m. UTC

Investor interest in the ether (ETH) futures and options market hit a new peak on Friday as the cryptocurrency’s price rose to 25-month highs. 

  • Open interest in futures or total value of outstanding contracts rose to a record high of $1.73 billion on Friday, according to data source Skew.
  • The previous record high of $1.45 billion was reached on Aug. 5.
  • The value of open positions in the options market also reached a record high of $454 million.
  • ETH’s price jumped to a two-year high of $445 on Friday and is trading near $435 at press time, according to CoinDesk’s ether price index.
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Ether futures open interest

  • Futures open interest has increased by nearly 300% this year.
  • On July 22, ETH’s price broke out of a two-month price range of $210 to $250.
  • Since then, ETH has rallied by 65% and the number of open positions in the futures market and options market has increased by 50% and 53%, respectively. 
  • Increasing open interest is viewed as indicating money flowing into the marketplace.
  • That rise in open interest combined with a price rally is usually taken to indicate there is solid support for the upward trend.
  • ETH has established a foothold above the June 2019 high of $365, while bitcoin has yet to clear the high of $13,880 seen 13 months ago.
  • The second-largest cryptocurrency by market value, ETH has gained nearly 240% this year, powered by the exploding popularity in decentralized finance (DeFi), which runs on the Ethereum blockchain.
  • “The DeFi boom looks to be powering gains in ether,” said John Ng Pangilinan, managing partner at Singapore-based Signum Capital.
  • Right now, the options market is currently skewed bullish on ETH with calls (bullish bets) claiming higher prices than puts (bearish bets) on the one, three, and six-month time frames. In short, most of those placing bets on the future direction of ether think the cryptocurrency still has room to rise.
  • In another sign of this belief, the futures market is in contango – a condition where futures price trades higher than the spot price. 
  • Denis Vinokourov, head of research at the London-based digital asset firm Bequant, noted that the continued rise in ETH’s price is notable considering how the costs of executing transactions on Ethereum’s blockchain have recently gone nuclear.

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