Ethereum: derivatives dominate ETH markets

Dominating the Ethereum (ETH) markets at this pre-Merge stage are derivative products. 

Ethereum derivatives products grow

This is reported by Conor Ryder on Kaiko, who points out among other things how in one month the percentage of volumes traded on ETH perpetual futures contracts rose from 45% to 57%. 

In fact, there is now an increasing dominance of futures trading volume over that on spot markets, such that derivatives markets are also having major effects on prices. 

During the past ten months, the daily trading volume of ETH futures has increased from $19 billion to over $33 billion, while spot volumes have increased from $3.7 billion to $4.8 billion.

Ryder notes that the current period, pending the Merge, is one of inevitable volatility, and futures markets become more attractive during periods of high volatility. 

He also reveals that investors seem to be bullish on the long-term future of Ethereum, but in the short term, they are somewhat hesitant because of the possible risks from any problems with the Merge. 

Futures are financial derivative products also used particularly by institutional investors and large speculators, especially as risk hedges. This is why they would be so attractive to those who invest in or speculate on ETH at this time. In fact, open interest recently hit a new all-time high. 

There is a huge amount of new positions opened in recent months, and this is also acting strongly on ETH prices themselves.

However, Ryder argues that most of the new capital that has entered the ETH futures markets is “short-bias.” 

There are indeed those who try to bet on some kind of failure, or serious problem, with the Merge, but the main reason for this imbalance on short positions could be trivially due to a huge, large-scale attempt to hedge long positions on ETH to reduce risk. 

The options market still better represents the current sentiment of investors, who are definitely “nervous” about the Merge view such that they are exposing themselves a lot especially to risk hedging. 

However, on the post-Merge future, they are somewhat reluctant to open short positions. 

Ethereum mining

Meanwhile in August Ethereum miners, who after the Merge will have to shut down or move to other chains, grossed $733 million in total. 

This figure seems to make the eventual fork more likely than commonly believed.