Ethereum derivatives trading has grown by nearly 10% over the past month in anticipation of the merger upgrade and update, with Ethereum derivatives acquiring as much as 57% of the combined Bitcoin and Ethereum futures trading volume.

In the past 24 hours alone, more than $35 billion has been traded in Ethereum futures, compared to $32 billion in Bitcoin futures.

Additionally, open interest, or the number of outstanding Ethereum contracts, nearly doubled to nearly $8.43 billion this week.

For September 2022, the total volume of derivatives traded for Ethereum was about $87 billion, compared to about $67 billion for Bitcoin, according to Coinglass data.

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For the record, futures contracts are agreements to buy or sell an asset at a predetermined price at some point in the future.

In the case of Ethereum futures contracts, Ethereum becomes the asset, as contracts can be settled through either physical delivery or cash transfer.

For example, when the futures contract expires, the buyer can receive Ethereum from the seller, or they can accept cash, to settle the contract.

Merge Upgrade Effect:

According to Kaiko, a cryptocurrency data platform, most traders are offering specific strategies in light of the upcoming consolidation.

Investors take short positions, suggested by funding rates data, and anticipate that there may be problems with consolidation while taking long positions in Ethereum to neutralize price risk.

Funding rates are payments made by traders based on the difference in price between the futures contract and the spot price of the underlying asset.

A negative funding rate indicates that traders expect the market to go south but it also provides a buying opportunity for futures contracts.

Some traders are also making themselves eligible for the new cryptocurrency from the Ethereum fork which some developers are said to be working on.

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If the merger is successful, it will result in a slower Ethereum issuance pattern, which reduces the number of Ether in circulation and ultimately causes the price to go up.

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This deflationary measure can reduce the amount of investors taking short positions as prices rise, depressing the current driver of futures trading.

While the future of Bitcoin is not tied to any software upgrade, a prolonged bear market may see an increase in short positions in the near term.

But institutional interest in bitcoin is growing amid a bear market.

BlackRock, the world’s largest asset manager, recently launched a special bitcoin fund for institutional clients.

The Chicago Mercantile Exchange also recently launched Bitcoin products and Ethereum futures contracts in euros, which we have already mentioned in previous articles.

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