Institutional investors are interested in Ethereum after “Shanghai” ── Increase in open interest in CME futures | coindesk JAPAN | Coindesk Japan

Ethereum carried out its long-awaited “Chappella” hard fork, also known as the “Shanghai” upgrade, on April 12th, making it possible to withdraw locked coins at will, giving the blockchain’s native token, Ethereum. (ETH) staking risk. This pivotal event has boosted institutional investor interest in the second largest cryptocurrency by market value.

According to official data from the Chicago Mercantile Exchange (CME), the number of active or open Ethereum futures contracts trading on the CME has increased 39% to 6,248 since April 10. In US dollar terms, open interest increased by more than 70% to $633 million. It hit a 12-month high of $675 million on April 14, according to data from CoinGlass. Each contract is worth 50 ETH and the listed price is denominated in USD per ETH.

CME Ethereum Futures Open Interest and Volume (CEM)

Institutional investors typically prefer regulated products like CME futures that allow them to gain exposure without owning crypto assets. As such, CME futures related to Ethereum and Bitcoin are widely believed to be used for institutional investor activity.

Jeff Anderson, crypto trader and former chief investment officer of liquidity provider Folkvang Trading, said, “Institutional investors have been forced to assess the underlying credit exposure of collateral on cryptocurrency exchanges. As a result, CME’s market share increased.” “The movement surrounding Chapela has exposed this with open interest at its highest level in 12 months.”

Noelle Acheson, author of the popular newsletter “Crypto Is Macro Now,” echoes a similar sentiment.

“The last few days have seen strong institutional interest in ETH futures,” Acheson said. “USD open interest is now at its highest level since March 2022, with CME ETH futures open interest jumping more than 80% in USD terms just before the weekend.”

An increase in open interest accompanied by price increases signifies the inflow of new money into the market and confirms the uptrend. Since the Chapela hard fork, the price of ETH has increased by 8%, according to CoinDesk data.

“ETH is definitely experiencing a characteristic flow right now,” said K33 Research analyst Vetle Lunde. “BTC Open Interest (OI) has decreased by 1.5% since April 10, while ETH OI has increased by 38.7% over the same period.”

“We are seeing a similar trend in exchange-traded financial instruments (ETPs). The BTC ETP experienced a net outflow of 1.52% from April 10th to April 18th, while the ETH ETP saw a net outflow of 0.77% over the same period. There was a net influx of ,” Lunde added.

As the futures basis (the difference between the futures market and the cash market) widened, the annualized three-month premium doubled to over 4%. The combination of higher open interest and higher basis suggests that leverage has been allocated on the bull side.

Rising premiums often attract carry traders to the market. Carry trading sets a market-neutral strategy by selling a futures contract and simultaneously buying an underlying asset in the spot market, pocketing the price difference between the two markets.

“The attractive basis is attracting more traders to the market,” said Anderson.

After Chapella, other exchanges have seen a surge in trading, suggesting that institutional investors are not the only ones flocking to the market now.

Dick Lo, founder and CEO of quant-driven trading firm TDX Strategies, said: “Deribit also hit a record high, and it’s a definitive institutional buy. It may not be proof,” he said.

Global ETH futures open interest, excluding CME, is up about 22% to $6.62 billion, according to Coinglass data. Open interest in ETH futures listed on Deribit jumped 30% to $750 million, the highest since May 2021 when it hit a record $778.6 million. level reached.

All exchanges, including Deribit and Binance, have increased their open interest. (Coin Glass)

“After the ‘Chapella’ upgrade, unstaking withdrawals have been orderly and well absorbed by the market, and we have also seen an increase in staking from ETH holders. Combined with the allure of staking yields that can be freely unstaked, there is growing bullish interest in ETH,” said Low.

｜Translation: coindesk JAPAN
｜Editing: Toshihiko Inoue
｜Image: CME
｜Original: Institutions Flock to Ether After Shapella Upgrade