Bull or Bear for ETH?

Ether (ETH) rose 11.7% between September 17 and September 19, hitting a three-week high of $2,572. This price movement coincided with higher interest in Ether futures open interest, which reflects the overall volume of contracts on exchanges. As a result, traders are wary that higher leverage increases potential price volatility.

Low interest rates support ETH's bullish momentum, but the US economy remains at risk.

The recent ETH price rally reflected the broader cryptocurrency market's 8.3% gain, driven by lower interest rates in the United States and strong labor market data. This momentum prompted the S&P 500 index to close higher on September 19. Low interest rates reduce the cost for companies to issue new debt, reducing the risk of a stock market correction.

However, economists are divided on whether the US Federal Reserve is effectively balancing economic growth and recession risks, according to a Yahoo Finance report. This ongoing uncertainty has led cryptocurrency investors to be cautious, asking whether it is too early to assess the success of the Fed's monetary strategy.

On September 20, FedEx shares fell 15 percent following disappointing corporate earnings released the day before. Chief executive Raj Subramaniam attributed the revenue shortfall to a “weak industrial economy” and inflationary pressures that have driven customers away from priority shipping services, particularly those associated with higher fees. As reported by Yahoo Finance, Subramaniam cited a “difficult operating environment” impacting operating margins.

Despite these broader macroeconomic concerns, Ether futures demand rose to 4.66 million ETH on September 19, the highest level seen since January 2023, indicating strong demand positions.

While the recent price gains clearly explain the increasing demand for Ether leverage through futures contracts, they do not indicate an increase in bullishness among traders. In dynamic markets, each buyer (long) is matched with a seller (short), but the level of demand fluctuates. This difference can be seen in the price of monthly ETH futures contracts.

ETH futures premium remains stable as open demand continues to increase.

One might expect bullishness to be the driving force behind the increase in demand for Ether futures, but the data does not provide a conclusion on this.

The ETH futures premium has been relatively stable at around 6% per year since August, slightly above the neutral 5% threshold. Traders generally require a premium to compensate for long settlement periods in monthly contracts. In periods of high happiness, this indicator can easily exceed 10%, as it was at the end of July.

This stability in the futures premium suggests that there is little incentive for traders to engage in a “cash and carry” strategy, which involves selling futures contracts and simultaneously buying ETH to capture the premium as a fixed income trade. Therefore, we can assume that there is some real demand for bear positions on Ether as the futures premium remains stable despite recent price gains.

Related: Ethereum is a ‘contrarian bet' in 2025, says Bitwise exec

Current market conditions are in contrast to late May, when ETH surged 28%, pushing futures to 4.44 million ETH – 5% below current levels. However, on May 31, the Ether futures premium rose to 14%, indicating excessive leverage from particularly bullish traders. Thanks to the balanced distribution of consumption between long and short positions, the risk of liquidation appears to be very low at this time.

Currently, Binance and Bybit lead the Ether futures market with a total open interest of $11.9 billion, commanding a market share of 30% and 17% respectively. This focus suggests significant retail demand, especially since OKX, Deribit and the Chicago Mercantile Exchange collectively hold 24% of ETH futures open interest.

Although open interest is rising, the absence of excessive leverage reduces fears of higher volatility in the near term.

This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.