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Ethereum open interest reaches record highs. Is ETH starting to rise?

Record Futures Interest and Price Action

Ethereum rose 15% between November 20 and 27, reaching $3,500 for the first time in four months. The rise coincided with a record high in open interest in Ethereum futures, leading traders to wonder if the increased activity signals overly optimistic sentiment.

Total interest in Ethereum futures has risen 23% over the past 30 days, reaching $22 billion on November 27. For comparison, three months earlier, interest in Bitcoin (BTC) futures was $31.2 billion. At a price above $4,000 on May 13, Ethereum futures had a total interest of $14 billion.

The main players in this market are Binance, Bybit and OKX, which hold 60% of the demand. Meanwhile, the CME (Chicago Mercantile Exchange) is expanding its participation and now holds $2.5 billion of open interest, signaling growing institutional interest in the market.

Leverage and Strategies in Derivatives

The high demand for leverage – from institutional or individual investors – is not always a sign of bullish expectations. Derivatives offer opportunities for a variety of strategies, including those that profit on declines.

An example of this is the “cash and carry” strategy, which involves buying Ethereum on the spot market and simultaneously selling the same amount via futures. Similarly, traders can exploit price differences between short-term and long-term contracts. These approaches increase the demand for leverage.

The annual premium on 2-month ETH futures

On November 6, the annual premium on 2-month ETH futures crossed the neutral threshold of 10% and reached 17% in the past week. This allows traders to earn fixed returns by hedging their risk through strategies such as “cash and carry”. Still, some participants are accepting a 17% cost to hold long leveraged positions, suggesting moderate optimism.

The risk of liquidations for small investors

The biggest risk in a highly leveraged market is from “degens” – individual traders who use leverage up to 20 times. Even a 5% drop in the price in a day can wipe out their deposit, leading to liquidations. Between November 23 and 26, long positions worth $163 million were liquidated.

Perpetual contracts as a market indicator

Perpetual contracts that follow the price of ETH are an important indicator of the health of small investors. They use a variable interest rate (usually between 0.5% and 2.1% per month) to balance the leverage. Currently, the interest rate on ETH perpetuals is around 2.1% per month – close to the neutral threshold. Although there was a brief spike above 4% on November 25, it did not last. This shows that retail investors’ interest in long leveraged positions is limited, despite a 15% weekly price increase.

Conclusion

The growing interest in Ether futures reflects institutional strategies such as hedging and neutral positions rather than excessive market optimism.

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