Ether Futures Activity Grows Ahead of July Protocol Upgrade

BitMEX announced a new ether quarterly futures product Friday, which they described as “the only one of its kind available in the market.” Settled in bitcoin, the contract trades the ether-dollar pair, and expiry is in June. This coincides with the scheduled ETH 2.0 launch in July, which Ethereum researchers are confident will happen, as CoinDesk previously reported.

Long positions in Bitfinex ether perpetual futures are also soaring ahead of the Ethereum upgrade. Those contracts began noticeably climbing starting in mid-March, just after the price of ether crashed to a little above $100. 

While quarterly futures have contract dates four times per year, perpetual futures trade without expiration dates. This gives traders some of the advantages of the futures markets such as high leverage while mimicking the price behavior of the spot market. 

“As a major source of ETH liquidity, Bitfinex of course has a lot of ETH traders,” Paolo Ardoino, CTO at Bitfinex, told CoinDesk. “The ETH 2.0 launch is being watched closely by investors and stakeholders,” said Ardoino.

Open interest for ether futures on Bitfinex is at just over $500,000 at the time of publication, while open interest on BitMEX, the largest market for ether perpetual futures, is just below $80 million, according to data aggregator CoinGecko. Bitfinex traders taking more long positions in ether futures could signal speculative bullishness ahead of the ETH 2.0 launch in addition to hedging strategies or an arbitrage trade incentivized by funding rates.

Cryptocurrency over-the-counter desks are also seeing increased investor demand for ether after recent March lows and heading into the scheduled ETH 2.0 launch. 

“We had decent ETH buying flow in the last drop on mid March with a few large investors taking a position on the upcoming 2.0 upgrade,” said Ricky Li, co-founder of trading firm Altonomy and former Manager of Research and Product for CME Group. But bitcoin buying flow is still “dwarfing” other cryptocurrencies, says Li.

Traders might be more bullish than other sectors in the Ethereum community, however. After previous delays in launching the ETH 2.0 mainnet, some of the Ethereum community is more “cautiously optimistic” as the July launch date approaches, said Wilson Withiam, Ethereum analyst at Messari. 

The ETH 2.0 mainnet launch has “too many variables that developers can’t account for at the moment,” Withiam told CoinDesk. But the community is generally enthusiastic about staking ether, and if the launch was delayed again, it “shouldn’t mute the community’s enthusiasm for staking,” said Withiam.

After mainnet launches, short-term returns for cryptocurrencies are largely negative, according to research from Messari. The price of ether was up less than 1 percent on Sunday at $195 at the time of publication, according to Bitstamp.