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Marcel Pechman
10 hours ago


ETHER FUTURES OPEN INTEREST HITS ALL-TIME HIGH — IS THE ETH BULL RUN STARTING?

Ethereum futures hit new records, possibly signalling a fresh bull run in ETH.

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Market Analysis
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Ether ETH $3,600.34 surged 15% between Nov. 20 and Nov. 27, flirting with the
$3,500 level for the first time in four months. This rally coincided with a
record-high Ether futures open interest, raising questions among traders about
whether the elevated leverage signals excessive bullish sentiment.

Ether futures aggregate open interest, ETH. Source: CoinGlass

Aggregate open interest in Ether futures climbed 23% in the 30 days leading up
to Nov. 27, reaching $22 billion. For context, three months earlier, on Aug. 27,
Bitcoin BTC $95,202 futures open interest stood at $31.2 billion. Additionally,
when Ether traded above $4,000 on May 13, ETH futures open interest was $14
billion.

Dominating this market are Binance, Bybit, and OKX, which collectively account
for 60% of ETH futures demand. However, the Chicago Mercantile Exchange (CME) is
steadily increasing its footprint. Notably, CME now holds $2.5 billion in ETH
futures open interest, signaling growing institutional involvement—a development
often seen as a hallmark of market maturity.

High demand for leverage, whether from institutional or retail investors, does
not inherently indicate bullish sentiment. Derivatives markets are balanced
between buyers and sellers, and they create opportunities for strategies that
capitalize on various scenarios, including price declines.

For example, the cash and carry strategy involves purchasing Ether in the spot
(or margin) market while simultaneously selling the same notional amount in ETH
futures. Similarly, traders can exploit rate differentials by selling
longer-dated contracts, such as those expiring in March 2025, while buying
nearer-term contracts like December 2024. These strategies do not reflect
bullish sentiment but significantly increase demand for Ether leverage.


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Ether 2-month futures annualized premium. Source: Laevitas.ch

The two-month ETH futures annualized premium (basis rate) surpassed the 10%
neutral threshold on Nov. 6 and has maintained a robust 17% over the past week.
This rate enables traders to earn a fixed return while fully hedging their
exposure through the cash and carry strategy. However, it is notable that some
market participants are accepting a 17% cost to maintain leveraged long
positions, suggesting a moderate degree of bullishness.


ETH LIQUIDATIONS COULD RISE DUE TO RETAIL INVESTORS

The greatest risk in a highly leveraged environment often stems from retail
traders, colloquially known as "degens," who frequently use leverage of up to
20x. In such cases, a standard 5% daily price drop can wipe out the entire
margin deposit, triggering liquidations. Between Nov. 23 and Nov. 26, $163
million in leveraged long ETH futures positions were forcibly liquidated.

To gauge the health of Ether retail futures positions, perpetual contracts serve
as a key indicator. Unlike monthly contracts, perpetuals closely mirror the ETH
spot price. They employ a variable funding rate—typically ranging between 0.5%
and 2.1% per month—to balance leverage between longs and shorts.

Related: Traders still riding on ‘hot altcoins’ despite Bitcoin pullback:
Santiment

ETH perpetual futures 8-hour funding rate. Source: Laevitas.ch

Currently, the ETH perpetual futures funding rate sits near the neutral
threshold at 2.1% per month. While there was a brief spike above 4% on Nov. 25,
it was not sustained. This suggests that retail demand for leveraged longs
remains muted, even with a 15% weekly ETH price increase.

These dynamics strengthen the argument that the rise in Ether open interest
reflects institutional strategies—such as hedging or neutral positioning—rather
than outright bullish sentiment.

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This article is for general information purposes and is not intended to be and
should not be taken as legal or investment advice. The views, thoughts, and
opinions expressed here are the author’s alone and do not necessarily reflect or
represent the views and opinions of Cointelegraph.


 * #Bitcoin
 * #Cryptocurrencies
 * #Funding
 * #Markets
 * #Leverage
 * #CME
 * #Futures
 * #Market Analysis


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