In the aftermath of the march, we’ve seen the open interest in the derivatives market ever increasing, reaching a new height of 558k Bitcoin. It’s meritorious to compare open interest in Bitcoin as it allows to view growth in futures leverage and changes in coin prices.
Furthermore, Futures Open Interest breaking above 550k BTC would signal a new ATH in futures leverage. This suggests the increased probability of a deleveraging event.
Funding Rate
A good alert idea about funding rates: Funding Rates (7D SMA) breaking below 0 would signal a negative reversal of the current premium price. While breaking above 0.005% would signal an increase in futures premium.
Observing perp funding rates, they are clearly showing a positive yield with 2.3% on an annualized basis.
However, Bitcoin futures markets are getting steady in trade volume, suggesting a slight bias towards the upside.
Ethereum Merge Incoming
It’s the first time ETH options are higher ($6.6 billion) than that of Bitcoin ($4.8 Billion). The ATH in ETH open interest is yet to appear, while Bitcoin’s OI is sitting at 35% of ATH.
Highlighting the September contracts for ETH, call options are dwarfing put options on the deribit exchange. Traders are speculative about ETH breaking above $2.2k, while some are optimistic about $5k.
On the contrary, the maximum pain level is standing at $1,350; this would cause the max open options contracts to run out of money.
A large demand for ETH has forwarded ETH volatility towards a zone of Euphoria. However, the positive slope is heavily influenced by traders willing to accept a premium for getting into long calls.
It is quite interesting to figure out the increase in demand for spot buying amidst a structural change that is coming to Ethereum.
Evidently, when there is an increase in ETH spot buying and increasing security concerns, investors tend to shift the assets into hot or cold wallets.
Therefore, observing exchange net flows is a fair metric for understanding the demand side. Currently, the exchange net position change shows just -$700M on net withdrawn per month.
Generally, $700M is a large amount; it pales in front of the gargantuan amounts of once $3B+ month.
Factually, these monthly withdrawal rates are just 2% compared to futures trade volume, while the same ratio has touched a whopping 20% in April’s deleveraging event.
For the uninitiated, ETH’s term structure is largely different from that of Bitcoin’s.
It is in a condition of backwardation, meaning that futures traders are pricing ETH at a discount post Merge, aligning with the higher premium options traders pay.
The discount rate is running at a negative 2.27% annualized. It forms a strong opinion that such a rate is obvious for two reasons: investors utilizing futures markets to hedge downside risk, and maybe fund the premiums paid on the options contracts.
Bitcoin investors are willing to tap into more exposure, while a little inconsistency is evident in directional conformity in Bitcoin’s futures market.
On the flip side, ETH is arguable in the phase suggestive that traders expect to “buy the news, sell the rumor.”
Ethereum Price Tumbles
Post Merge Ethereum price has been quite volatile. In the last 24 hours, its native token, ETH, has witnessed another correction. At the time of writing, ETH’s price declined to the $1,200 mark on CoinMarketCap after seeing a fresh 4% setback.
Disclaimer: The information provided in independent research represents the author’s view and does not constitute investment, trading, or financial advice. VOC doesn’t recommend buying, selling, trading, holding or investing in any cryptocurrencies
