Ethereum Futures Volume Hits Highest Level On Binance Since Mid-December — Details

[Ben Graham]

Over the week, Ethereum struggled to sustain any significant move to the upside. Although the second-largest cryptocurrency reclaimed the $3,300 price level, it could not break above $3,400 to continue its path towards higher price levels. As it stands, it appears that the Ether token is taking on a short-term bearish structure. However, an on-chain evaluation has recently been put out, which suggests that market participants might be gearing up for a significant move in the near-term.

Ethereum Futures Activity Reaches Monthly High Following Market Inactivity

In a recent QuickTake post on the CryptoQuant platform, analytics group Arab Chain reveals that there has recently been a spike in futures trading activity on the Binance derivatives market. This revelation is based on the Binance: ETH Futures Daily Volume metric, which monitors the total value of Ethereum futures contracts being traded on Binance each day, hence reflecting market activity, trader participation, and potential leverage exposure.

The latest reading of the metric has highlighted a major shift, with trading volume climbing as high as $21.7 billion. According to Arab Chain, this reading marks the highest level since mid-December, reflecting that strong momentum has returned to the futures market.

 

Notably, the spike in futures trading volume was preceded by a period of relative decline in the second half of December. This event coincides with a period of price stability, alongside a tapering risk appetite among traders. Interestingly, institutional investors also contributed prevalent aversion to risk.  Arab Chain explains that the decline is a typical sign that market participants want to “wait and see,” instead of speculatively opening large positions.

However, the present scenario — where futures volume surged — paints an opposing story. As the futures trading volume reflects levels above its mid-December high, it becomes apparent that interest among Ethereum traders is being rekindled. This is because increasing futures volume “is typically associated with higher leverage usage, hedging activity, and speculative positioning” — a line up which indicates that the market is preparing for significant movement.

The reason for this spike could also be attributed to traders who are reacting to key technical levels or shifting expectations around near-term price action of a potential trend reversal. In the grand scheme, however, the Ethereum price reacts to this activity, depending on the alignment of spot demand with derivatives activity. Till such a definite sign comes up, the market stands at a point of uncertainty.

ETH Price Overview

As of this writing, Ethereum stands at a price of $3,292, reflecting no real growth since the past day.