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May 1, 2021 08:45
| Update:
May 1, 2021, 08:45
Ethereum futures information shows that professional traders believe that $3,500 ETH is the next stop for the highest altcoin.
Since Ether (ETH) created an unbeatable price of $2,800 on April 29, so did its open futures contracts. The figure of $8.5 billion marks a 5% monthly growth and shows the tremendous increase in value behind strong mercantilist activity.
Considering that CME Group has $355 million in open positions in the future and Bitcoin’s $2.4 billion, some analysts may dismiss Ethereum’s derivatives. However, the ether contract was launched separately one or two months ago. Every FTX and Deribit shoppers need 100% complete KYC, and these markets together hold $2 billion in open ETH contracts.
From this perspective, the open position of silver futures is currently at $22.6 billion. This precious metal has decades of history of mercantilism, with a total asset value of US$1.4 trillion. However, a direct analysis of the number of outstanding contracts is useless, as these contracts are usually used for hedging.
The growth of futures is positive, but not a necessary optimistic indicator
In order to assess whether the market is optimistic, there are one or two derivative indicators that need to be reviewed. Mainly the futures premium (also known as the basis), which measures the value gap between the cost of derivatives and conventional commodity transactions.
Three-month futures should sometimes be traded at an annualized premium of one-tenth to twenty, which should be understood as a disposal rate.
As the chart above shows, the ETH futures premium went crazy for a while, reaching five-quarters of the annual price. Although the FOMO of traders competes against each other, it also shows extreme optimism. Skilled traders most often use monthly futures contracts, while perpetual contracts are the tool of choice for retail investors.
Retail investors were flat for a while
Perpetual contracts are also called reverse swaps, and the funding rate for these contracts is sometimes charged every eight hours. As long as buyers use higher leverage, this fee will increase, so their accounts are almost {rarely} consumed. Once a delirious retail shopping occurs, the cost will reach 5.5% per week.
As the chart above shows, the financing rate in the last 8 hours reached a peak of 0.18% in one day and worshipped 3.8% every week. Although this has undoubtedly contributed to the extremely optimistic monthly futures, the impact has been minimal due to the negligence of funding rates in the past few days.
This information shows that compared with retail investors, skilled traders are more optimistic about Ether, because the current three-month benchmark price is 25 cents per year. This price is higher than that offered by most stablecoin processing services, which means that longs (buyers) are willing to pay a premium to maintain their positions.
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