The close of Ethereum’s highly-anticipated transition to the proof-of-stake (PoS) consensus mechanism has left ETH investors with no catalyst event to look forward to for the rest of 2022.
Ethereum (ETH) prices fell in the second-half of September 2022 as The Merge turned into a “sell the news” event. What the Ethereum Merge has put into place is renewed optimism among ETH investors, indicated by an over 50% increase in open interest in ether futures contracts since the lows of June 2022.
What are ether futures contracts? Read on to learn more about Ethereum futures price and outlook for ETH for 2022 and beyond.
About: Ether futures contracts
Ether futures are a type of futures contracts that allow traders to speculate on the future price of ether.
What are futures contracts? A futures contract is a derivative that involves an agreement to buy or sell an asset at a predetermined price in the future.
An ether futures price is derived from the value of ether. These contracts allow traders to take both a long and short positions on the ETH price.
ETH futures contracts are also used by investors to hedge against market volatility. For example, a trader with a long ETH position can open a short ETH futures position to shield against losses in case ETH prices drop.
It is important to note that futures contracts are leveraged financial products. Investors can open a large exposure to ETH at only a fraction of the cost with the use of margins. Leverage can result in increased gains and unlimited losses.
Perpetual options are also popular among crypto traders. These contracts are a type of futures contract without an expiry date.
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Ethereum futures price analysis
The price for ether futures is derived from the price of ETH. According to the world’s largest financial derivatives exchange, CME Group (CME), ether futures prices are based on a daily reference rate of the US dollar price of one ether.
How has ETH traded in 2022? The world’s second-largest cryptocurrency by market cap has lost about 64% of its value year-to-date (YTD), as of 6 October 2022.
Risk aversion due to soaring interest rates and recession concerns has resulted in a slump in the value of cryptocurrencies and equities. Since hitting an all-time high of $4,891 on 16 November 2021, ETH has fallen about 72% to its current trading price of $1,360 on 6 October 2022.
Between early April to mid-June, ETH saw 11 consecutive weeks of losses following the collapse of the Terra ecosystem and aggressive interest rate hikes from the US Federal Reserve (Fed). On 18 June 2022, ETH prices fell to a one-and-a-half year low of $881.
The build-up to Ethereum’s highly-anticipated transition to the PoS consensus mechanism, a move known as “The Merge or Ethereum 2.0”, supported ETH prices to climb as high as $2,030 by mid-August 2022. Ahead of The Merge, ETH outperformed BTC as ETH/BTC exchange rates hit a nine-month high of $0.0856 on 7 September 2022.
According to the CME Group, many traders had set up a “long cash plus short futures” trade in the build-up to The Merge. More recently, ETH posted a monthly loss of over 14% in September 2022 as tailwinds began to fade after the completion of The Merge in mid-September.
At the time of writing on 6 October 2022, ETH was trading on Binance near the $1,360 mark. CME Ether futures price stood at $1,358.
Looking forward: What drives ETH futures?
Macroeconomic news has been the major driver of cryptocurrencies in 2022. The fall in the ETH price came in line with a slump in equities as investors became fearful of a prolonged bear market in risk assets due to rising interest rates and multi-decade high inflation.
The Merge was seen as the biggest catalyst and risk event for ETH prices, up until its completion on 15 September. With the Ethereum Merge done and dusted, it looks highly likely that Ethereum futures price in the last quarter of 2022 could be heavily influenced by macroeconomic forces.
Rich Excell, instructor of Finance at the University of Illinois Gies College of Business, said in a blog post for CME Group:
“There have been many ebbs and flows to the cryptocurrency market through the years. One common theme that has attracted both retail and institutional investors is the relationship and intuition that if global central bankers debase fiat currencies with ultra-easy monetary policy, there should be more upward movement of cryptocurrencies.”
The month of October saw worries among investors ease as data from the US showed that job openings in the country fell the most in nearly two-and-a-half years in August.
US monetary policy makers see the sharp fall in job listings as a positive sign that interest rate hikes carried out since March 2022 have begun to dampen demand and control inflation.
ETH prices rose over 6% in the first week of October on bets that the US Fed is past its peak hawkishness and on expectations of less aggressive rate hike in the remainder of the year. Investors will continue to look to economic data on unemployment, housing growth, inflation and consumer expectations as their guide to anticipate central bank policies.
Looking at the open interest of Ethereum futures contracts may give us an idea of the current market sentiment among ETH traders.
Historical data of aggregated open interest of ether futures compiled by The Block, as of 6 October, revealed that peak open interest in ETH futures of over $13.7bn coincided with ETH’s rise to an all-time high of $4,891 in November 2021.
More recently, ETH futures contracts have seen increased open interest since falling to below $5bn in mid-June, representing new money coming into the market in recent weeks.
Open interest in ETH futures has climbed over 50%, from about $4.8 on 17 June to $7.5bn, as of 6 October.
A metric to watch out for is the increase in the Ethereum futures open interest leverage ratio, which is calculated by dividing the open contract value to the ETH market cap. The ratio indicates the amount of leverage within the market.
Blockchain research firm Delphi Research explained in a newsletter:
“Higher values suggest that open interest is large, relative to the market size. This implies a higher risk of market squeezes, liquidation cascades or deleveraging events. In turn, lower values generally imply a lower risk of such derivatives-led trading activity.”
Ethereum futures price prediction for 2022 and beyond
Let’s take a look at algorithm-based price targets, which can be helpful when forecasting Ethereum futures price in 2022 and beyond.
An Ethereum price prediction from CoinCodex on 6 October 2022 indicated that the coin could fall to $1,283 in one-month’s time.
To get possible clues on the Ethereum futures price in 2025, we can look at PricePrediction’s 2025 ETH price forecast which, as of 6 October, expected the coin to trade at an average price of $4,799 in 2025.
DigitalCoinPrice’s 2030 ETH price forecast indicated bullish sentiment for Ethereum futures price in 2030. ETH was seen trading at an average price of $18,939 in 2030.
Note that Ethereum futures price predictions and ETH price forecasts can be wrong. Forecasts shouldn’t be used as a substitute for your own research.
Always conduct your own due diligence and remember that your decision to trade or invest should depend on your risk tolerance, expertise in the market, portfolio size and goals. Never trade money that you cannot afford to lose.
FAQs
How will futures affect ethereum price?
Ether futures can affect ETH prices by driving market sentiment as traders may read higher open interest in ether futures as a sign of a bullish or bearish movement. High use of leverage in ether futures contracts can also affect ETH prices through events such as market squeezes, liquidation cascades and deleveraging events.
Where can I buy ether futures contracts?
Traders can buy ether futures contracts on centralised exchanges such as Binance and CME and on decentralised exchanges such as dYdX.
What is the price of Ether futures contracts?
Ether futures contracts prices are derived from the value of ETH. According to the world’s largest financial derivatives exchange CME Group (CME), ether futures prices on the CME are based on a daily reference rate of the US dollar price of one ether.