Open Interest: Ethereum Surpasses Bitcoin For The First Time!

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It is historic. For the first time in the history of digital assets, the open sum of Ethereum is greater than Bitcoin. Which actually seems to be a consequence of upgrading the Ethereum blockchain through The Merge.

Ethereum open interest is skyrocketing!

Yesterday, the Glassnode platform noted that Ethereum’s open interest figures on the Deribit exchange exceeded those of Bitcoin on all exchanges. With 5.6 billion dollars for Ethereum figures against 4.3 billion for Bitcoin.

Good to know: Open interest measures the total amount placed in a particular asset’s derivatives. By “shorting” or “shipping” an asset, the trader increases the open interest of this asset. More graphically, the open interest synthesizes the permanent fight between the bulls (bull) and the bears (bear).

Earlier in the weekend, open interest on ETH even rose above $7 billion. And hedge funds seem to be positioning themselves as the prince of cryptocurrencies. As data from The Block indicates, global open interest in Ethereum options reached 7.58 billion on July 30. At the beginning of the month, this same indicator showed 2.74 billion dollars. That’s an increase of more than 175% in just 30 days.

The Merge was eagerly awaited!

If for the first time in history the open interest of Ethereum exceeds the sum of Bitcoin, it is for a specific reason: the upgrade of the Ethereum blockchain. Elements that push some analysts today to assert that Ethereum may take precedence over Bitcoin in the future.

even though transfer from Proof of Work to Proof of Stake save more than 99% of resources for the Ethereum blockchain, investors seem to be taking bets on a successful migration.

Not to mention after the migration, Ethereum is expected to be a deflationary asset. A significant feature in a context where inflation is dangerous with 10% whether in Europe or on the other side of the Atlantic. According to the latest data, the migration should take place on September 19.

Open interest: a tool to gauge market sentiment!

In the world of trading, many tools can be used. If we keep the indicators of technical analysis often, certain data like the ones of open interest are crucial to understand a market.

Concretely, open interest corresponds to the the value of all outstanding contracts on an asset that have not yet been settled. In other words, open interest specifies the number of contracts held by market participants or investors who remain in waiting positions. Therefore, we understand why this tool can provide some clarity on the market’s perspective. But also the forces underlying the prices.

Ethereum at $3,000 in December 2022?

The return of institutional believers in Ethereum 2.0 could have a major impact on the price of ETH. As Joshua Lim, Head of Derivatives at Genesis Global Trading, explains:

A more recent phenomenon is the popularity of low-premium ETH option structures from macro-option hedge funds as they stand for the merger. A buy butterfly could be a common structure that pays if ETH/USD ends in December 2022 around the spot price of $3000. These serial structures with longer maturities raise open interest in ETH options.

Either way, if Ethereum starts to rise again, the asset could drag the entire crypto market down in its wake. Since the low point last June, Ethereum has just gained 90%. If we are referring to the last 30 days, the signal is up 49%, a level that greatly surpasses Bitcoin and its +19% in 30 days. If we are to believe the various prediction algorithms, the scenario of ETH at $3,000 within 6 months does not seem realistic.

Also read: What The Merge could change for the Ethereum blockchain!

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