The open for Ethereum futures hit a new record, raising doubts over whether ETH can rise beyond $3,800.

For the last three days, Ether (ETH)$ 3,578 has been battling the $3,600 mark, but traders may have forgotten that the price of ETH has increased by 58.8% since February. While some market participants believe that the limited rise is due to the uncertainty around the possibility of a U.S. approval for a spot Ether exchange-traded fund (ETF), others argue that the increase in Ether futures open interest is a sign of robust institutional investor demand.

Ether’s price depends on the May spot ETF decision

The ramifications of the US Justice Department’s charge against the cryptocurrency exchange KuCoin are still up for debate. On the one hand, the stricter regulatory environment the indictment has caused is seen as bad for the business. On the other hand, some contend that this development strengthens the chances of approving a spot Ether ETF by May 25, the day the U.S. Securities and Exchange Commission (SEC) is anticipated to make its final ruling.

The U.S. Commodity Futures Trading Commission (CFTC) filed a lawsuit against KuCoin on March 26 for engaging in illegal trading operations. The complaint specifically named Bitcoin (BTC) at $705,503, Ether, and Litecoin (LTC) at $94.58 as “digital assets that are commodities,” placing them squarely under the CFTC’s purview. This position contradicts the SEC’s claims that Ether might be considered a security.

According to Unchained Crypto, BlackRock CEO Larry Fink stated in a March 27 interview on FOX Business that registering an Ether ETF would still be possible even if authorities categorized the asset as security. In the meantime, senior ETF analyst James Seyffart of Bloomberg maintained his denial prediction in May in an update posted on the social network X on March 27. He noted that the CFTC had recognized Ether as a commodity since at least February 2021, “when they allowed CME Ethereum futures to begin trading.”

Expanding the Ether futures market is a good thing because it allows hedge funds and prominent asset managers to participate more quickly due to increasing liquidity, especially in the regulated Chicago Mercantile Exchange (CME) market. It is not appropriate to instantly interpret the March 28 record high in aggregate Ether futures open interest as a bullish indication.

It’s crucial to remember that Binance is in the lead with $4.55 billion in market positions for ETH futures, followed by Bybit at $2.4 billion. There is $1.3 billion in open interest in CME Ether futures. Therefore, it would oversimplify the situation to attribute the recent spike to institutional investor interest alone.

Furthermore, the volume of long positions—bets on a price increase—always matches the volume of short positions—bets on a price decrease—in every derivatives market. Nonetheless, the desire for leverage can be used to gauge bullish or negative sentiment in the market.

Ether derivatives show a degree of cautious optimism

Inverse swaps, sometimes known as perpetual contracts, have a rate that changes in response to an imbalance in the demand for leverage. While a negative funding rate implies a preference for bearish bets, a positive one shows increasing demand for bullish leverage situations.

According to recent data, there is an increase in demand for leveraged long positions in Ether (ETH), where the financing rate is now at 0.04%, or approximately 0.8%, every week. Rates of more than 1.2% weekly indicate overconfidence and that traders are currently somewhat bullish.

Data from the Ether options market should be examined to better and more precisely assess the sentiment of professional traders. The 25% delta skew can help us understand whether arbitrage desks and market makers are charging extra for upward or downward protection. More specifically, predictions of a price decrease are indicated by a skew metric above 7%, whereas market excitement typically produces a negative skew below -7%.

The delta skew of ether options shows that call and put option pricing are balanced, consistent with a neutral position in the market. Comparing the data from March 21, when the ETH skew indicator began to show optimism, traders are now less bullish about Ether’s chances of breaking above the $3,800 barrier.