Ether (ETH) has experienced a significant price increase of 38.5% over the past month, reaching above the $3,100 level for the first time since April 2022. This surge can be attributed to the anticipation of a spot Ether exchange-traded fund (ETF) in the United States, pending approval from the Securities and Exchange Commission.
The rising demand for leverage has caused the open interest in Ether futures to surpass $10 billion, which has raised concerns among investors. The previous peak of $11 billion in November 2021 marked the all-time high for ETH, followed by a 55% correction. This has led some investors to question whether a similar correction could occur this time.
Data shows that before February 12, the open interest in Ether futures had been unable to exceed $8.5 billion for two years. However, in less than two weeks, it has now reached $10.6 billion, indicating a significant increase in the demand for leverage in ETH positions. It is important to note that this metric does not account for any imbalance between buyers and sellers.
Analysts from JPMorgan estimate a 50% chance of an Ether ETF being approved by May. Some investors believe that Ethereum’s transition to a proof-of-stake consensus model and the introduction of staking yield could be viewed as a security offering by the SEC. In addition to the expectations of a spot Ether ETF, there has been a growing influx of capital into liquid-staking derivative applications like EigenLayer, which recently secured $100 million in funding.
Furthermore, optimism towards ETH’s price has been fueled by airdrops, such as the successful launch of the Starknet (STRK) layer-2 solution token, which currently has a market capitalization of $1.4 billion. The yet-to-be-launched token from layer-2 project Blast has also attracted over $2 billion in deposits since its controversial launch in November 2023.
To gauge whether Ether investors remain bullish after the recent gains, it is important to analyze the ETH futures premium, also known as the basis rate. Data shows that the ETH futures premium has been hovering around 15% since February 14, which is considered a healthy bullish level with no signs of excessive leverage. This is in contrast to the 22% premium seen on January 3, which indicated a higher risk of liquidation due to over-optimism among traders.
Analyzing options markets can further shed light on investor sentiment. The 25% delta skew, which measures expectations of price movement, reveals balanced pricing between call and put options, with a skew metric of -3%. This suggests that traders have been somewhat skeptical of Ether’s ability to sustain levels above $3,000.
In summary, derivative metrics indicate a healthy market for Ether, with its price reaching a 14-month high and no signs of excessive leverage from bulls. However, it is important for investors to conduct their own research and exercise caution when making investment decisions, as every investment carries its own risks.