Ether (ETH) has experienced a significant price increase of 38.5% over the past month, surpassing the $3,100 level for the first time since April 2022. This surge in price is likely due to the anticipation of a spot Ether exchange-traded fund (ETF) in the United States, pending a decision from the Securities and Exchange Commission.
The rising demand for leverage has led to Ether futures open interest exceeding $10 billion, causing concern among bulls. This is particularly worrisome as the previous peak of $11 billion in November 2021 marked the all-time high for ETH, followed by a 55% correction.
Investors may be wondering if they should be worried this time around. Data shows that prior to February 12, Ether futures open interest had remained below $8.5 billion for two years. However, it took less than two weeks to reach the current $10.6 billion, indicating a significant increase in demand for leverage in ETH positions. However, this metric does not account for any imbalance between buyers and sellers.
In addition to the expectation of a spot Ether ETF, there has been a growing inflow of capital into liquid-staking derivative applications. For example, EigenLayer recently secured $100 million in funding from Andreessen Horowitz, causing its total value locked to jump from $1.8 billion to $8.3 billion in just 30 days. Airdrops, such as the successful Starknet token, have also contributed to optimism towards ETH price.
To determine 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 without excessive leverage. This is in contrast to the 22% annualized premium seen on January 3, which indicated a higher risk of liquidation due to overly optimistic traders.
Analyzing options markets can also provide insights into investor sentiment. The 25% delta skew, which measures the expectation of price drops, currently stands at -3%, indicating balanced pricing between buying and selling options. This metric has remained neutral since February 20, suggesting that traders were somewhat skeptical of Ether’s ability to sustain levels above $3,000.
Overall, derivative metrics suggest a healthy market for Ether, with no signs of excessive leverage from bulls despite the recent price surge. It is important for readers to conduct their own research and make informed decisions when it comes to investments and trading, as every move involves risk.