Ethereum's rally remains driven by speculative trading

Ethereum’s price is rising, but most of the momentum is coming from derivatives and arbitrage-driven ETF inflows.

Ethereum's rally faces skepticism as derivatives dominate trading

Ethereum’s trading volume indicates heavy reliance on derivatives. From July 10 to 17, daily futures and perpetuals trading fluctuated between $39.5 billion and $65.3 billion, while spot trading barely exceeded $3 billion. As ETF interest surged, spot activity remained a small part of the total. This reliance on speculative trading suggests a fragile rally that could collapse quickly if over-leveraged positions unwind. Despite a record inflow of $1.78 billion into Ethereum ETFs, much of this capital is likely tied to hedged positions rather than genuine bullish sentiment. The current ETF inflows reflect arbitrage rather than sustained demand, presenting a risk for Ethereum's price stability.

The stark contrast between derivatives trading and spot activity raises important questions about the sustainability of Ethereum's rally. The market appears driven by short-term trades, potentially setting up a precarious situation. Investors should be cautious as a heavy reliance on derivatives can mask underlying market weaknesses. The surge in ETF inflows does not necessarily signal strong long-term confidence. Instead, it highlights underlying risks that could lead to volatility. For Ethereum to maintain its momentum, it needs true long-term investments and commitment from buyers rather than reliance on speculative strategies.

Highlights

Market participants should monitor the balance between derivatives and real demand for a clearer outlook.