Ethereum has hit a new milestone in the derivatives market, with futures open interest surpassing $20.8 billion on Friday, up 12% in just 24 hours. This rally coincides with a 7% increase in price, which saw Ethereum trade at $3,365, according to data from The Block .
Bullish signals for Ethereum derivatives
Open interest, a key metric that measures outstanding contracts in derivatives markets, has reached unprecedented levels. According to a report by CryptoQuant, the open interest-weighted funding rate of futures has reached positive all-time highs of 0.0374%, indicating a predominance of long-positioned traders betting on an upward price movement.
This behavior reflects a marked optimism among traders, driven by the increasing use of leverage. Ethereum’s estimated leverage ratio has also reached a record high of 0.40, suggesting an increase in the level of risk taken by traders in search of higher returns.
Warnings about possible corrections
However, the report warns that this excess leverage and the predominance of long positions could increase the risk of a massive liquidation in the event of volatility. A “long squeeze” could trigger significant corrections if prices suddenly move in the opposite direction.
Increased activity on the Ethereum network
The derivatives market is not the only booming segment. In November, the transaction volume on the Ethereum network has shown a significant increase of 85%, rising from $3.84 billion on November 1 to $7.13 billion on November 15. This resurgence is attributed to:
Massive inflows into Ethereum ETFs.
Increased market confidence following Donald Trump's victory in the US presidential election, raising expectations of a more favorable regulatory environment for cryptocurrencies.
Impact of the overall crypto market
The widespread optimism has also benefited the cryptocurrency market as a whole. Bitcoin hit a new all-time high of $99,500, acting as a catalyst for altcoins, with Cardano up 46% and Solana up 22% over the past week.
According to BRN analyst Valentin Fournier, institutional participation is leading Bitcoin’s rally, while retail interest is growing steadily. Fournier projects that Bitcoin could reach $120,000 before the end of the year, although he warns of potential volatility upon breaching the key $100,000 level, which could trigger liquidations of leveraged positions.
Conclusion
Ethereum and the broader cryptocurrency market are at a crucial moment, with strong catalysts driving optimism. However, investors should be on the lookout for elevated volatility that could trigger corrections in the coming days.
