Ethereum has been gaining an amazing amount of traction in recent weeks, with the second-largest cryptocurrency by total market capitalization, showcasing gains of 50+% over the last 30-odd days. Furthermore, even the Ether derivatives market seems to be growing fairly rapidly, with an increasing number of investors now dabbling into ETH futures.
However, before proceeding any further, it would be best to understand what exactly a futures contract is.
Simply put, it is a ‘derivative product’ that establishes an agreement between two individual entities to buy or sell an asset at a future date, for a set price. As a result of this agreement, traders are afforded the ability to speculate on the future valuation of any asset.
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The ETH futures market is soaring
To put things into perspective as to how big the Ether Futures market has really become, we can see that volume and open interest for Ethereum futures on the Chicago Mercantile Exchange (CME), one of the world’s largest derivatives marketplaces, recently hit all-time high figures.
To be a bit more specific, Ethereum futures volume on CME scaled up to a whopping 5,469 contracts (273.5k ETH approx.) while open interest reached 2,462 contracts (123.1k ETH approx.) on April 24. The data seems to hint at the fact that an increasing number of institutions are becoming bullish on Ethereum’s short-to-mid term monetary prospects, which bodes well for the currency’s financial future in general as well.
Also, from a historical standpoint, it is pertinent to mention that over the course of the past 12 months, ETH’s value has soared by more than 1200%. For example, around the onset of the COVID 19 pandemic last year, Ether was trading for roughly $135, however, after the CME announced its decision to list ETH futures in November, the altcoin started surging, closing out the year at a price point of roughly $735.
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Expounding his views in regard to the future of the Ethereum derivatives market, Ben Zhou, CEO of cryptocurrency derivatives exchange Bybit, opined that ETHs short term prospects are extremely bright, especially as it seems that the project is being looked at by an increasing number of retail and institutional investors as one of the core transaction/development layers of the global crypto ecosystem. He further added:
“I have to admit that Ethereum futures are really gaining a lot of mainstream traction right now. Not only that, I think that the crypto derivatives market, in general, is also fast catching the eye of many investors across the globe, especially as institutional players continue to enter this burgeoning space, allowing it to mature faster.”
The numbers speak for themselves
As Ether continues to soar to new all-time high (ATH) values seemingly every other day, a lot of experts believe that a price target of $10,000 could be a legitimate target in the medium term. Furthermore, it bears mentioning that this growth comes amidst rising criticism regarding Ethereum’s high transaction fee costs and network congestion issues.
That said, it should be noted that since the recent ‘Berlin hardfork’, the average price of facilitating a transaction on the Ether network has dropped from around $18 to $10. This is especially impressive when one takes into account the fact that a vast majority of all decentralized finance (DeFi) products have been built atop Ethereum.
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From a monetary standpoint, data available online suggests that the total value locked (TVL) in the DeFi space is currently $124 billion. When one considers that a vast majority of these products have been devised using Solidity, the programming language that powers the Ether ecosystem, it stands to reason that Ether — as well as its various derivatives offerings such as futures, options — can grow quite tremendously in the coming months and years.
For example, as a result of Ether’s recent explosive monetary inflow, the currency’s open interest reached a record high of $8 billion. It is worth mentioning that this number represents 50% of Bitcoin’s derivatives market from just two months ago.
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