Ethereum's open interest has surged up to 40% since last week. In addition, the number of active Ether future contracts trading on the Chicago Mercantile Exchange (CME) has increased to 6,248 since April 10.
The good news sometimes comes in pairs. For example, this update came as Ethereum's highly expected Shapella upgrade — enabling a total withdrawal of users' staked ETH — was implemented recently.
The Shapella upgrade reduces the risk of staking the token by enabling users to withdraw locked assets whenever they please. This is expected to become a masterstroke; as Shapella upgrade unlocks staked ETH, it would likely motivate it to deliver more incentives due to competition.
It was much-welcome news and the most prominent thing in the Ethereum space since the Merge in September 2022.
Now, there is the Ether open interest.
Reports from the CME – the derivatives marketplace – show that the open interest in Ether futures has surged to the highest measure since March 2022. This event has signalled the entry of institutional traders into the crypto market.
The number of active Ether futures contracts trading has increased by almost 40%, with the open interest doing the same, albeit by 70%. The combined open interest of Ethereum futures surpassed $8 billion nearly a week ago, yet, a far cry from the all-time high ETH open interest of $11.2 billion in November 2021.
Open interest means the total number of open positions on Ethereum futures and perpetual contracts in the current market. In addition, it is the number of positions that have been opened (by traders and investors) but have yet to be closed or utilized.
With open interest, the open position in a contract is tracked, as opposed to the total volume traded in it. Hence, open interest can outline an efficient portrayal of a contract's liquidity and interest – highlighting if the cash flow is increasing or decreasing.
It can also be used to figure out market sentiment and price trends. This is seen as a substitute for institutional activity, signifying that investor interest in Ethereum has soared.
Some crypto enthusiasts and investors had a thing or two to say.
Noelle Acheson, the author of a well-known crypto newsletter, "Crypto is Macro now," opined,
The past few days have seen a strong inflow of institutional interest into ETH futures. As a result, USD open interest is now at its highest since March 2022, and just before the weekend, ETH futures open interest on the CME jumped over 80% in USD terms.
Jeff Anderson, a crypto trader, had this to mention.
The CME's market share has grown as institutions have been forced to evaluate the credit exposure underlying their collateral on crypto native exchanges.
He further said,
The attractive basis has brought more traders to market.
Some crypto exchanges also had their fingers in the pudding. For example, open interest in Deribit-listed ETH futures soared 30% to $750 million, almost equalling its previous high of $778.6 million in May 2021.
When there is an increase in open interest, together with a price rise, it signifies an influx of money into the market. So, unsurprisingly, the coin's price rose by 8% past the $2000 mark at the time of writing.
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