ETH futures have been on a tear in open interest, hitting an all-time high of $7.1 billion on March 21. This boost comes despite the annualized premium for ETH monthly futures having fallen to below 4%. This is a remarkable drop from 5% only two weeks ago. The move indicates a turning point in traders’ sentiment and strategy in ETH’s integrated options market.
Declining Futures Premium Signals Strategy Shift
This drop in the futures premium reflects lower returns for traders to use the so-called “cash and carry” arbitrage strategy. On average, the ETH monthly futures annualized premium hovers between 5-10%. This premium partly compensates for the longer settlement period.
The “cash and carry” strategy consists of selling futures contracts while buying spot ETH at the same time. The further narrowing premium would make this strategy less attractive, which could drastically affect trading volumes and overall market dynamics.
ETH Price Under Pressure Amid Market Downturn
As of February 21, ETH has lost 28% of its value. This slump is more than double the broader crypto market’s 14% drop during the same time.
This price pressure is caused by a confluence of factors such as increasing macroeconomic headwinds and a general lack of demand for DApps. This could be due to increased competition between DApps or simply waning investor interest.
Futures Market Dominated by Key Exchanges
On March 21, total open interest in Ether futures surged to reach 10.23 million ETH. This wave is the equivalent of the last two weeks combined with a stunning 15% lift. The futures market is focused almost entirely on a few heavy hitters.
Binance, Gate.io, and Bitget combined make up 51% of the market. The Chicago Mercantile Exchange (CME) accounts for a significant 9% of ETH open interest. Bitcoin futures on the same exchange are king, controlling a dominant 24% market share.
