Large traders are speculating on the merger, which is fueling ether derivatives activity. After hitting $7 billion Friday, the aggregate open interest in ether options was $5.9 trillion on Saturday. Large traders are increasingly speculating on Ether-based Derivatives as Ether’s transition from proof of work to proof-of stake is happening.
The aggregate open interest in ether options across top-tier exchanges grew from $2.74 to $7 billion on July 2, to more than $7 billion by July 29, It is currently at $5.9 trillion. The value of all outstanding contracts yet to settle is called open interest.
The aggregate open interest in ether futures reached $7.58 billion on the 30th of July, an increase of $4.71 billion from July 2.
Joshua Lim, Genesis Global Trading’s head of derivatives, explained to The Block that the increase in activity was due to macro hedge funds positioning themselves ahead for the “merge” ethereum. This refers to the transition of the network from proof-of work to proof-of stake.
In anticipation of the merger, Ether’s price has risen. The native token of Ethereum saw its value rise 59% in the past one month. The merger is expected to take place in September.
He wrote that “a more recent phenomenon was the popularity of low-premium option structures in ETH, macro-discretionary funds positioning for the merger.” A common structure could be a call-butterfly that can pay off if the ETH/USD trades at $3000 spot in December 2022. These multi-leg, longer maturities are driving up open interest in ETH options.
These strategies require traders to trade more derivatives. This can impact volumes and open interest. For example, a so-called call butterfly involves two short options and twice as many long options.
Another institutional trader said to The Block that “Ether Options [open interest] makes market sense because everyone is speculating about the merger.”
In fact, aggregate open interests across ether options are greater than aggregate open interests of bitcoin options markets. Open interest in the latter asset stands at $5.1 billion.
Given the more optimistic bitcoin derivatives market that has seen spot trading volumes rise and futures volumes increase, the activity in the ether’s derivatives marketplace is quite remarkable. This indicates that bitcoin trading activity has moved to futures trading.