Ether Derivatives Trading Spikes Ahead of Ethereum Merger

As anticipation builds up toward the Ethereum merger, Ether-based derivatives trading is also surging massively. Per new reports from TheBlock, the aggregate open interest of Ether options was on a climb throughout July, albeit across all top exchanges. That is, the value of all unsettled contracts, rose from $2.74 billion to a massive $7 billion. And this was in less than a month – between July 2 and July 29 to be precise.

Similarly, there was a massive rise in the aggregate open interest of Ether futures as well. That one rose from $4.71 billion on July 2 to surpass $7.58 billion as of July 30.

Ethereum Merger Effect?

Meanwhile, according to Joshua Lim, head of derivatives at Genesis Global Trading, the surge in ether derivatives trading is not unrelated to the upcoming merger. While the merger is slated for September, it will also see the cryptocurrency network migrate from proof-of-work to proof-of-stake. And that is exactly why macro hedge funds are positioning themselves in advance.

As Lim highlights, low-premium options structures are now quite commonplace in ETH, and they are from none other than the macro-discretionary hedge funds waiting for the merge. About the structures and how they impact the open interest in ETH options, he wrote:

“A common structure might be a call butterfly that pays off if ETH/USD finishes in December 2022 around $3000 spot price.”

He then explained how the lengthy maturity and multi-leg structures of ETH are increasing the number of outstanding contracts therein.

Meanwhile, aggregate open interest for ETH options is considerably larger than that of Bitcoin (BTC). For clarity, BTC’s open interests presently stand at $5.1 billion. For what it’s worth though, activity in BTC derivatives market shows that BTC is now being traded against futures.

The network’s native token ETH, on the other hand, is also in impressive form. In July, ETH rallied by nearly 60%, also in anticipation of the Ethereum merger.

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