TL:DR Breakdown
- Despite the sudden rise in price of ETH amid high gas fees, Ethereum futures traders have shown little interest in making research.
- New protocol set to launch.
- The new protocol called EIP-1559 will be used to fix daunting gas fees.
Considering ETH’s value rise in the past weeks, ETH futures traders are so optimistic towards a further rise. This optimism for further growth is fueled by Ethereum’s price movement above the $2000 mark. According to certain analysts, this Ethereum bullish run was propelled by Visa’s USDC settlement in transactions on the network.
Other analysts believe that ETH value rise is a result of its escape from the triangular market structure.
Not giving attention to the cause of this value rise, ETH Futures traders seem somewhat optimistic. However, this optimism can be traced to the hiking ETH futures basis, which recorded its highest historical level.
Despite the risks of liquidation, professional traders don’t seem disturbed. Investors anticipate the protocol improved proposal “EIP-1559,” which is to be launched in July as it attempts to fix high gas fees. The new protocol intends to utilize block sizes with more flexibility instead of the present rigid model.
ETH Futures and the rise in the price of Ethereum
Price differences between the futures contract and present spot market are obtained from futures premium (basis). This price difference has resulted from the postponement of settlement from sellers who demand a higher price instead. This follows the trading of three months futures at a 10 – 20 percent annual premium.
This basis on ETH futures has equaled the previous high point at 38 percent, indicating that it can be detrimental to the leverage longs. Above 20 percent, the basis typically doesn’t show a crash, but the risk could present itself if ETH drops to $1750 considering buyers’ over optimism. At times, buyers express their leverage but end up buying the asset in question (Ether) to drub the future risk.
The high leverage of invariable month contracts is a result of continued futures purchase by retail buyers. Due to their variable rates of funding, market makers, whales, and arbitrage desks avoid these contracts. As Etheruem reaches a new high, professional ETH Futures traders set up positions as the market gives positive signals.
