Ethereum implemented the highly anticipated Shapella hard fork, also known as the Shanghai upgrade, on April 12, allowing locked coins to be withdrawn at will, reducing the risk of staking the blockchain’s native token Ethereum (ETH). This significant event has fueled institutional interest in the largest crypto altcoin project by market cap. Here are the details…
Institutional investors buy altcoins
The number of active or open Ethereum futures contracts traded on the Chicago Mercantile Exchange (CME) since April 10 rose 39 percent to 6,248, according to official data. In US dollars, open interest increased by more than 70 percent to $633 million. That figure hit a 12-month high of $675 million on Friday, according to data from Coinglass. Each contract is worth 50 ETH and is traded in US dollars per 1 ETH.
As we reported on cryptokoin.com, institutions often opt for regulated products, such as CME futures, that provide exposure to crypto assets without owning them. For this reason, CME futures tied to ETH and Bitcoin are widely considered a proxy for corporate activity. Jeff Anderson, a crypto trader and former CIO of Folkvang Trading, used the following statements:
CME’s market share has grown as institutions have had to assess the credit risk underlying their collateral on crypto local exchanges. The activity surrounding Shapella demonstrated this, with open interest at a 12-month high.
New money entering the market
Noelle Acheson, author of the popular Crypto is Macro Now newsletter, expressed a similar view. “The last few days have seen a strong influx of institutional interest in ETH futures. “USD open interest is now at its highest level since March 2022, and just before the weekend, ETH futures open interest on CME increased by over 80 percent in USD terms.”
An increase in open interest along with a price increase represents new money flow into the market and confirms the uptrend. According to the data, ETH price has increased by 8% since the Shapella hard fork. “ETH is definitely experiencing unique flows right now,” said Vetle Lunde, senior analyst at K33 Research. “BTC OI has dropped 1.5 percent since April 10, while ETH OI has increased 38.7 percent over the same period,” he said, referring to the open interest (OI). The expert used the following statements:
We’re seeing similar flows in exchange-traded products (ETPs). BTC ETPs saw 1.52% net outflows from April 10 to April 18, while ETH saw net inflows of 0.77% over the same period.
Do institutions definitely receive ETH?
The gap between prices in the futures and spot markets widened and the annual quarterly premium doubled to over 4%. The combination of increasing open interest and expanding base indicates that leverage is being allocated to the bullish side. The rising premium often attracts carry traders. Carry trading involves creating a market-neutral strategy by selling futures and simultaneously buying the underlying asset on the spot market to pocket the price difference between the two markets.
Activity on other exchanges has also gained momentum after Shapella, showing that institutions are not the only ones flocking to the market right now. “Open interest has also reached record highs in Deribit, so there may not be conclusive evidence of institutional buying,” said Dick Lo, founder and CEO of quantity-focused trading firm TDX Strategies.
Global ETH futures open interest excluding CME increased almost 22% to $6.62 billion, according to data from Coinglass. Open interest on ETH futures listed on Deribit rose 30% to $750 million, reaching the highest level since the record high of $778.6 million in May 2021.
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