Chuks is a blockchain enthusiast and finance researcher that has covered the crypto sphere for several years. He believes that the evolving technology would change how we do business.
For the first time in the history of Ethereum, its futures contract has generated unprecedented interest as it has eclipsed $1 billion. This indicates that the biggest altcoin enjoys greater adoption, sending signals that speculators are backing Ethereum.
According to Skews, the market Analytics firm, this comes on the heels of the current price movement as the platform prepares for Ethereum 2.0. Futures contracts are based on speculations that the price of the altcoin would move in a certain direction in the future. The open contracts are deals that have been agreed and are yet to expire. It is between two parties that agree to buy or sell ETH at a predetermined price later in the future.
When the number of such undertakings is high, it means that the contracted buyers foresee an increase in price and believe in the future potential of the coin. But to hedge against loss on the part of the issuer, the sellers get fees which guarantees they won’t lose out completely.
Since the last month, open interest on Ethereum futures has been on the rise. $800 million open interests were recorded in June but as at the time of filing, this report over $1 billion ETH futures contracts have been recorded. OKEx presently has the biggest open futures valued over $290 million. Huobi and BitMEX are at the second and third spots with a combined contract value of $200 million.
The open interest in ETH contracts was on the rise before the coronavirus pandemic fears that caused the U.S. stock market crash. The effect is that ETH futures fell to $400 million.
This was the value as of March this year. Since then Ethereum open contracts have steadily risen, benefiting from the recent increase in the price of the altcoins and the anticipation of the success of ETH 2.0, this was incentivized by the high demand for decentralized finance (DeFi) platforms.
Even though ETH interest is growing in n leaps and bounds, its open interest is still nowhere near Bitcoin which remains the undisputed leader of cryptocurrency contract. BTC futures interest as of July 21 was a whopping $4 billion. It is pertinent to note that ETH has posted a higher rate of increase since June when the two biggest cryptocurrencies started a rally.
It remains to be seen if ETH can continue on this trajectory for a long time. If this happens, it is only a matter of time before ETH open interest leaves BTC future in its wake.