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Why Won’t Ethereum Stop? Ethereum has shown impressive growth in the last month, increasing 38.5% and surpassing the $3,100 level not seen since April 2022. This rise seems to be primarily focused around the expectation of a spot Ether exchange-traded fund (ETF) approval, depending on the decision of the US Securities and Exchange Commission (SEC).
The increase in leverage demand has pushed the open position of Ether futures trades over $10 billion, creating concern among some investors. However, historical data shows that this increase in open positions is not necessarily a sign of a problem. Before February 12, the open position of Ether futures trades had remained below $8.5 billion for two years. The rapid rise to the current level of $10.6 billion indicates a serious increase in leverage demand for ETH positions. However, this metric does not take into account the balance between buyers and sellers.
Ethereum
Beyond the expectation of a spot Ether ETF, significant capital inflows have been observed into liquidity-earning derivative applications like EigenLayer. This platform has seen its total value locked (TVL) jump from $1.8 billion to $8.3 billion in the last 30 days. Besides, some airdrops like the successful Starknet (STRK) token, despite having a modest TVL compared to their market values, have increased optimism towards ETH’s price performance.
Also, Ethereum’s derivatives market shows a healthy demand for leveraged long positions. The premium on ETH futures trades, an indicator of investor sentiment, has been running at about 15% since February 14, indicating a healthy level of bull without signs of excessive leverage. This shows that compared to the annual premium of 22% seen on January 3, the indicator presents a higher risk of liquidation due to traders overly optimistic about the price. Why Won’t Ethereum Stop? Developments in the ecosystem further increase faith in it, and accordingly, we see nice increases!
The options market provides an important indicator for assessing investor confidence and sentiment. The 25% delta slope, while assessing expectations for future price movements, has been relatively neutral since February 20. This situation indicates that traders are somewhat skeptical about maintaining Ethereum’s current price levels above $3,000.
In summary, derivative metrics suggest a healthy market environment as Ethereum reaches its highest price in 14 months without excessive bullish leverage indicators. Despite the impressive rise, the balanced pricing of options and cautious sentiment in the futures market indicate that cautious optimism prevails among traders.
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