Demand growth in the derivatives market indicates a growing institutionalization of the ETH — similar to what was observed with bitcoin in 2018, the situation implies an increase of the asset price.
According to the Skew Analytics, the second-largest cryptocurrency by market capitalization reached a new record level of the derivatives market.
The Skew chart shows the total number of open option contracts approaching to $ 150 million, which is the highest since the launch of the product.
Open interest on derivatives at ETH. Source: Skew
Meanwhile, the current open interest in the options on bitcoin is about six times more than the Etheruem — about $ 1 billion, a similar level was observed in 2018.
The capital injection is growing
Looking back, the outstanding contracts are outstanding transactions on the futures market. They are equal to the total number of purchased and sold options on cryptocurrency. The increase in the value of open interest indicates that the options market behaves more money and Vice versa.
However, the capital that enters the market, it can be focused both on growth and on reducing prices. Thus, the only way to measure the mood of investors is to measure the total number of put options (on the decline) versus call options (growth).
If the ratio of the so-called «put/call» above 1, this means that most investors expect falling prices of option contracts. However, speed is subject to fluctuations as the new contracts with the expectation of opposing offset the price of the asset are opened or closed regularly.
The ratio of put/call options for ETH. Source: Skew
The increasing open interest confirms the price trend from the spot market. But it is the growing interest of famous traders and institutional investors to the underlying asset. Thus, Ethereum noticeable wins from the point of view of the growth of the options market.
In the footsteps of Bitcoin
One of the reasons why Ethereum is witnessing the increasing institutional interest, is the indirect participation of the network in a series of successful projects. Blockchain, the Ethereum network is the Foundation for the world’s leading tablconv (USDT, USDX, PAX) and received a lot of attention recently decentralized Finance (DeFi) projects (Maker, Sythentix, dYdX, Compound).
Although it is not exactly so, but similar set of factors helped to show the influence of bitcoin in an environment of large institutions. This, in turn, has helped institutional investors begin to use the first cryptocurrency in their portfolios in the derivatives market, including options and futures on bitcoin.
Ethereum is considering similar opportunities thanks to its technological growth. Cryptocurrency could witness the growth of the derivatives market, as more and more institutions are looking for alternatives with higher returns. In the result of open interest in derivatives may continue to grow, while his mood in the spot market also improved and the price of the asset increases.