Ethereum Futures open interest has hit a record of $6.5 billion recently. The reason behind hitting this record is the recent surge in ETH price as it has rallied by around 33% in the past five days. As soon as this data revealed, the buyers have started to use excessive leverage. The analysts claim that this should not be considered completely negative as such a huge premium for a short period on an Ethereum futures contract is completely normal.
Ethereum Futures Premium Rising Above 5.5%
It has been seen that Ether has been facing an upward movement for the past few months. However, since the start of this month, it is evident that the Ethereum price is increasing very impressively and broke the $1,500 psychological barrier. In the recent analysis, it has been revealed that the Ethereum futures premium is rising above 5.5%.
Analysts believe that this kind of number is clearly unsustainable. When the sustainable basis goes above 20%, it clearly indicates excessive leverage from the buyers. This also leads to the massive liquidations of the funds and it ultimately results in a market crash. A lot of time, traders tend to increase the use of leverage, but at the same time, they also purchase the underlying asset to deal with the risk.
Professional Investors Doing Cash and Carry Trades
The open interest on Ethereum Futures, which has reached a record $6.5 billion is basically a 128% monthly increase. It is revealed that professional investors here have been doing the cash and carry trades, and investors buy the underlying asset here while selling the futures contracts. Several analysts have predicted that this kind of arbitrage position does not have any kind of liquidation risks, and this is probably a positive indicator amid such a strong rally.