With Ethereum Merge Nearing Ether Derivatives Trading Rise By Hedge Funds

The demand for Ethereum-based futures is rising as major traders bet more and more on the cryptocurrency’s impending switch from proof-of-work to proof-of-stake.

Ether options’ total open interest surged from $2.74 billion on July 2 to more than $7 billion on July 29 across the biggest exchanges. It is presently $5.9 billion. The total value of all active contracts that have not yet been settled is known as open interest.

In the meanwhile, the total open interest in ether futures increased to $7.58 billion on July 30 from $4.71 billion on July 2.

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With Ethereum Merge Nearing Ether Derivatives Trading Rise by Hedge Funds 3

Ethereum merge anticipation spikes all activities

The increase in activity is related to macro hedge funds positioning themselves in front of the alleged Ethereum “merge,” according to Joshua Lim, head of derivatives at Genesis Global Trading. 

In advance of the merge, the price of Ether has increased, jumping 59 percent in the past month. Ether is the native cryptocurrency of Ethereum. In September, the merge is anticipated to take place.

“A more recent phenomenon has been the popularity of low-premium options structures in ETH from macro-discretionary hedge funds positioning for the merge.”. “A common structure might be a call butterfly that pays off if ETH/USD finishes in December 2022 around $3000 spot price.

Joshua Lim

These tactics affect volumes and open interest since they are more complicated and call for traders to trade more derivatives. For instance, a so-called call butterfly consists of two short call options and twice as many long call options.

In fact, the total open interest throughout the markets for ether options is higher than the total open interest of the markets for bitcoin options, which now stands at $5.1 billion.

Given the more buoyant bitcoin derivatives market, which has witnessed a spike in the ratio of spot trading volumes to futures volumes, the activity in the ether derivatives market is noteworthy. That suggests that trade in bitcoin has shifted from futures to trading in the fundamental asset.

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