Ether Futures Demand Peaks – ETH Bull Run Begins?

Ether (ETH) rose 15% between November 20 and November 27, flirting with $3,500 for the first time in four months. The rally coincided with record high open interest in Ether futures, raising questions among traders as to whether the higher leverage indicates excessive bullishness.

Total open interest in Ether futures increased 23% in the 30 days to November 27, reaching $22 billion. For context, three months ago, on August 27, Bitcoin (BTC) futures open interest stood at $31.2 billion. Additionally, when Ether traded above $4,000 on May 13, ETH futures open interest was $14 billion.

This market is dominated by Binance, Bybit and OKX, which collectively account for 60% of ETH futures demand. However, the Chicago Mercantile Exchange (CME) is steadily increasing its footprint. Notably, CME currently holds $2.5 billion in open interest in ETH futures, indicating growing institutional participation—a development often seen as a sign of market maturity.

Strong demand from both institutional and retail investors does not indicate bullishness. Derivatives markets are balanced between buyers and sellers, and create opportunities for strategies that can be used in a variety of situations, including discounting.

For example, a cash-and-carry strategy involves buying Ether in the spot (or margin) market and simultaneously selling the same amount in ETH futures. Similarly, traders can take advantage of price differentials by selling longer-dated contracts while buying recent contracts such as December 2024.

The two-month ETH futures annualized premium (base rate) crossed the 10% neutral threshold on November 6 and has remained strong at 17% over the past week. This rate allows traders to earn steady returns while maintaining full exposure to cash and carry strategies. However, some market participants are known to accept a 17% cost to hold sophisticated long positions, which suggests a moderate level of bullishness.

ETH liquidity may increase due to retail investors.

The biggest risk in a high-use environment comes from retailers who often use up to 20x capacity, commonly known as “degens”. In such cases, a normal 5% daily price drop can wipe out the entire margin deposit, triggering liquidity. Between Nov. 23 and Nov. 26, $163 million in leveraged long ETH futures positions were forced off.

To measure the health of Ether's retail futures, perpetual contracts serve as a key indicator. Like monthly contracts, perpetuities closely mirror the spot price of ETH. Variable Funding – typically between 0.5% and 2.1% per month – to balance leverage between longs and shorts.

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Currently, the ETH Perpetual Futures funding rate sits near the neutral limit of 2.1% per month. Although there was a brief increase of more than 4% on November 25, it was not sustainable. This suggests that despite the 15% weekly ETH price increase, retail demand remains leveraged long-term.

These dynamics suggest that the rise in ether open demand reflects institutional strategies—such as hedging or neutralization—rather than brute force.

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.