Golden Finance reports that Matrixport released a daily chart analysis stating that in the current complex dynamics of the cryptocurrency market, the price trend of Ethereum is showing unique characteristics, and leveraged trading plays a key role in it. Recently, the funding rate of Ethereum has soared to 13.7%, reaching the highest level since February. Under normal circumstances, such a high funding rate often attracts capital inflows into Ethereum ETFs, and such capital inflows are usually regarded by investors in the market as positive signals, indicating an optimistic market expectation for the future price trend of Ethereum.
However, a more crucial market signal is that the outstanding contract volume of Ethereum futures is gradually approaching the peak of December 2024. The volume of open interest is an important indicator for measuring market activity and investor participation. A large number of open interest means that there are a large number of unsettled trading positions in the market. When the volume of open interest increases, it indicates that more investors are entering the market or that existing investors are increasing their position size. The outstanding contract volume of Ethereum futures this time is close to the historical peak, which clearly indicates that among the many factors currently driving the price trend of Ethereum, leveraged futures traders play a leading role rather than spot buyers. This forms a sharp contrast to the market situation of Bitcoin, where spot demand remains the main driver of prices.
A further in-depth analysis of the market structure reveals that the purchase volume of call options in the Ethereum market has recently witnessed a sharp increase. Call options grant the holder the right to purchase an asset at a specific price within a specific period of time. When market participants buy a large number of call options, it indicates that they expect the asset price to rise. And this large-scale call option purchase behavior will trigger the Gamma hedging effect. Gamma is the second derivative of the option price with respect to the price change of the underlying asset. It measures the sensitivity of Delta (the first derivative of the option price with respect to the price change of the underlying asset) with respect to the price change of the underlying asset.
In the context of a sharp increase in call option purchases, market participants such as market makers need to constantly adjust their investment portfolios to buy or sell the underlying asset (i.e., Ethereum) in order to hedge risks. This process will introduce significant gap risks to the price movement of Ethereum. Gap risk refers to the risk that due to a significant gap between the market opening price and the closing price of the previous trading day (forming a price gap), investors are unable to trade at the expected price and thus face potential losses.
Overall, the current Ethereum market is presenting a fragile state and is extremely sensitive to further momentum changes. Due to the dominance of leveraged trading, the position structure of investors in the market is relatively unstable. Once market sentiment changes or unexpected macroeconomic events, regulatory policy changes and other factors occur, leveraged traders may quickly adjust their positions, triggering large-scale liquidation activities, which in turn leads to sharp fluctuations in the price of Ethereum. Meanwhile, the gap risk brought about by Gamma hedging triggered by call options has also increased the uncertainty of market price trends. For investors, when participating in Ethereum market transactions, it is necessary to closely monitor these key market indicators and risk factors, carefully assess their own risk tolerance, and formulate reasonable investment strategies to cope with the current complex and volatile market environment.
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