Two main Ethereum market metrics show that professional traders are driving ETH’s new highs.

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According to Ethereum futures info, professional traders believe $3,500 ETH is the next stop for the top altcoin.

As Ether (ETH) hit a new all-time high of $2,800 on April 29, so did its futures open interest. The $8.5 billion figure represents a 52 percent monthly surge and demonstrates the vigourous trading volume that is behind the meteoric price rise.

Given that CME’s future has $355 million in open interest relative to Bitcoin’s $2.4 billion, some observers may discount Ether derivatives. However, Ether contracts were just introduced a few months back. Both FTX and Deribit demand full-KYC for all of their customers, and these markets have a whopping $2 billion in ETH open interest.

 

Ether futures aggregate open interest, USD. Source: Bybt

To put this in context, the open interest in silver futures is currently $22.6 billion. The precious metal has a long trade tradition and a market capitalisation of $1.4 trillion. A straightforward study of the number of outstanding contracts, on the other hand, isn’t particularly useful since it can be used for hedging.

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Growth in futures is positive but not a guaranteed bullish indicator

There are a few derivatives metrics to consider before determining if the market is bullish. The first is the futures premium (also known as the basis), which calculates the price difference between futures contract prices and spot market prices.

The 3-month futures contract should typically sell at a 10% to 20% annualised premium, which should be read as a lending rate.

 

24-hour average OKEx 3-months ETH futures basis. Source: Skew

As seen in the chart above, ETH’s futures premium exploded in mid-April, peaking at 45 percent annualised. While traders’ FOMO was a factor, this also indicated intense optimism. Though monthly futures contracts are most often used by experienced traders, perpetual contracts are the prefered instrument of institutional investors.

Retail investors are flat at the moment

Perpetual contracts, also known as inverse swaps, have a borrowing premium that is often paid every 8 hours. This fee rises as longs (buyers) use more leverage, causing their balances to be gradually depleted. When there is a supermarket shopping spree, the charge will hit 5.5 percent per week.

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Ether perpetual futures 8-hour funding rate. Source: Coinalyze.net

The 8-hour funding rate recently peaked at 0.18 percent on April 14, equal to 3.8 percent a week, as seen in the chart above. While this definitely led to the highly bullish monthly futures basis, the effect has faded as the funding pace has been negligent over the last few days.

This data shows that, as compared to institutional buyers, specialist traders are more optimistic on Ether, with a 3-month return of 25% per year. This cost is higher than the majority of stablecoin lending facilities, indicating that longs (buyers) are willing to pay a premium to hold their positions open.

 

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