What to expect as Ethereum’s perpetual futures plummet

Posted: September 25, 2023

• The ETH perpetual futures contracts volume has declined on Huobi and across other exchanges.
• The funding rate remains positive but has declined over the past few weeks.

Recent data shows that Ethereum’s [ETH] perpetual futures contract volume has experienced a decrease. What implications might this decline have for the derivative market?

Read Ethereum (ETH) Price Prediction 2023-24

Ethereum sees a decline in the derivative market

Glassnode Alerts recently posted data indicating a notable decline in Ethereum’s perpetual futures contract volume on Huobi within the past 24 hours. This decrease, illustrated on the chart, marked the lowest point this metric has reached in the past half-year.

At the time of the post, the volume dwindled to approximately 17,560 ETH, equivalent to more than $27.9 million.

Additionally, a broader examination of the perpetual futures contract volume across various exchanges on Glassnode revealed a general downtrend.

As of the time of this report, the overall volume had fallen to just over 1.8 billion ETH, representing a substantial drop from the over 4 billion ETH recorded the day prior.

Source: Glassnode

Perpetual futures contracts serve as a tool for traders to speculate on the price fluctuations of ETH without needing to possess the underlying asset. One of their distinctive features lies in their lack of an expiration date.

This distinguishes them from conventional futures contracts, which come with predetermined expiration dates.

Possible implications

The decrease in Ethereum perpetual contract volume indicates a reduction in market liquidity. This, in turn, can result in wider spreads and greater challenges when attempting to execute larger trades without causing significant impacts on market prices.

Furthermore, reduced liquidity can lead to increased slippage, where executed trade prices may substantially differ from the expected prices.

Additionally, lower liquidity renders the markets more vulnerable to potential price manipulation by sizable traders or market participants. This heightened susceptibility arises from the fact that fewer trades are required to produce significant price movements in such conditions.

How much are 1,10,100 ETHs worth today

Current price trend and funding rate

At the time of this report, Coinglass data indicated a positive funding rate for Ethereum. However, it’s worth noting that this funding rate has been decreasing over the past few weeks, in contrast to what was observed in the early part of August.

Additionally, Ethereum was trading at approximately $1,592 at the time, reflecting a modest decline of less than 1%.

Source: TradingView