30s Summary

Ether (ETH), the cryptocurrency related to the Ethereum blockchain, hit a peak value of $3,444 on 12 November following Bitcoin’s high of almost $90,000. The increase in Ether led to concerns that its price might fall below $3,200 due to the surge in futures trading. Perpetual futures, similar to bets on Ether’s future price, saw costs rise to 6.1% on 12 November. Despite volatility in future orders over recent months, the market sentiment is not more optimistic than usual, and an 11% drop in Ether’s price seems unlikely. Over one week in November, $513 million was exchanged for Ether in the U.S., which could counterbalance the high demand for futures trades.

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On Nov. 12, Ether (ETH), the cryptocurrency linked to the Ethereum blockchain, reached a value of $3,444. This was its highest price tag since July. This followed Bitcoin (BTC) hitting a historic high of almost $90,000 before settling back at $87,000 the same day. Now, some folks are worrying whether Ether’s surge and the subsequent increases in futures trades might lead to a drop in its price below $3,200.

So, what’s all this about futures? Well, there’s a thing called perpetual futures (don’t worry, sounds complex but it isn’t really!). These are a bit like bets on the future price of Ether. Think of it like doing a deal where the price is fixed now, but the actual trade happens in the future – a bit like ordering a pizza to be delivered later tonight.

Normally when everyone is very bullish – which means they think the price will go up – the cost of these deals can increase as well. Yet, anything up to 2.1% a month is considered pretty normal. But on Nov. 12 the cost shot up to 6.1%, the highest in eight months. This made it very costly for would-be buyers to place their future orders.

Between late February and mid-March 2024, the cost of these future orders stayed over 2.5% a month. At one point it hit a steep 11%, although this didn’t seem to stop trader activity for about two weeks. Other ways to buy Ether were also used as alternatives.

There are other types of future deals that can be done, such as Ether futures contracts, which have fixed premiums (sort of like a fee) known before buying. Also, traders can simply take out a loan to buy more Ether immediately, this is known as margin trading.

People are also keeping an eye on the Ether options market. This can help to get an idea of whether traders are being overly optimistic. The data at the moment suggests that, although there was a surge in future trades, overall the market sentiment isn’t more optimistic than usual.

There is also a belief that further increases in Ether’s price may be on the horizon. Some traders may not have been ready to quickly raise their stakes as Ether’s price went up over the weekend, creating a temporary imbalance.

Finally, from Nov. 6 to Nov. 11, $513 million was exchanged for Ether in the U.S., suggesting robust demand. This may offset some of the large appetite for Ether future trades. At the moment, it would seem unlikely that a sudden chain reaction of sell-offs will occur if Ether’s price drops to $3,070, an 11% decline from the Nov. 12 high. But as any good crypto enthusiast knows, anything can happen!