Data suggests that many cryptocurrency investors are still bullish on Ethereum (ETH) despite skepticism about its future. This is evident in the fact that open interest in Ethereum futures has risen to record levels, while the value of assets locked in applications built on its network has increased, indicating growing confidence.
Donald Trump’s victory in the US presidency has revived some hopes of a DeFi bull market, boosting demand for Ethereum. But it’s not alone in the game, facing stiff competition from Solana and Tron that could take a lot of the liquidity from it.
Futures Investors Bet on Ethereum (ETH) Price Rise
According to CoinGlass data, total open interest in perpetual contracts and traditional futures contracts has reached a record high of 6.32 million ETH, worth over $27 billion, up 17% since the beginning of the month.
Ethereum Open Interest Volume on Exchanges Source: CoinGlass
It is well known that rising open interest coupled with rising price is an indicator of an uptrend. Ethereum has surged 35% to $3,400 this month, matching the gains made by Bitcoin.
On the other hand, data from Velo shows that the spread between three-month Ethereum futures and spot prices, or the premium, has risen to 16% year-over-year on external exchanges such as Binance, OKX, and Deribit.
Meanwhile, the premium on front-month CME futures has risen to 14%. This is worth noting, as a higher premium could spur greater interest in cash arbitrage trades to capture the spread between the two markets. This could lead to increased inflows into U.S.-listed spot Bitcoin ETFs.
Futures market premium refers to the difference between the futures price and the spot market price of the asset.
When the futures price is higher than the spot price of the underlying asset, there is said to be a positive premium. This typically indicates an expectation that prices will continue to rise, prompting investors to pay more to buy futures than current prices.
A higher premium can be a sign of increased interest by investors in profiting from future price movements of the asset. It is also commonly used in strategies such as cash arbitrage to profit from price differences between two markets.
Increase in the volume of locked (collateralized) assets
The surge in the price of Ethereum has helped push the value of assets locked in applications built on the Ethereum network to $65 billion as of Wednesday, a level not seen since May 2022.
It is worth noting that a large portion of these assets are locked in three major applications, with the liquid staking protocol Lido holding over $32 billion worth of Ethereum, the lending protocol Aave holding $26 billion in various assets, and the re-collateralization platform EigenLayer holding $14 billion.
The data also shows an increase in revenue, fees, new wallets, and on-chain activity on the Ethereum network. Last month saw higher levels of activity compared to the May-September period. However, these indicators are still far from the yearly peak seen in March when interest in Ethereum ETFs was at its peak.
What does this mean for the price of Ethereum (ETH)?
The increase in the value of the assets locked (TVL) in a cryptocurrency network, such as Ethereum. It refers to the increase in the amount of digital assets deposited or used in decentralized applications (DeFi) on that network.
When the value of locked assets increases, it means that there is increasing interest in using this network by users and investors.
For a cryptocurrency’s price, an increase in TVL is usually a positive sign. It shows that there is growing confidence in the network and the applications built on it, and that more people are locking their assets in it. Whether it’s to take advantage of the benefits of DeFi, staking, lending, or other services.
This increased interest could lead to increased demand for the network’s native currency, such as Ethereum, which could drive its price up over time as usage and trust increase.
Tough competition from Solana and Tron
Despite this, the Solana network and its applications continue to dominate the decentralized finance (DeFi) activity thanks to its broader appeal to individual users and low fees.
In contrast, stablecoin data shows that the Ethereum network now holds more USDT than Tron. Total USDT on Ethereum has reached $60.3 billion compared to $57.94 billion on Tron, for the first time since June 2022.
On the emotional side, Donald Trump’s presidential victory has revived some hopes for a DeFi bull run, at least among some investors, boosting demand for Ethereum.
The campaign has signaled a move toward easing the regulatory burden on cryptocurrencies, which could make it easier for DeFi platforms to operate in the United States, a promise that has fueled the growth of Ethereum and other major DeFi coins since early November.