Ethereum Gathers Momentum as Grayscale Picks Up $38 Million in ETH

Ethereum enjoyed a big day on Tuesday in the market. The asset set an all-time high price, its open interest reached a record high of over $5 billion and institutional crypto fund Grayscale picked up over $38 million worth of ETH.

The protocol is currently the world’s most-actively used blockchain in terms of daily users and on-chain value transfer, with use cases ranging from sophisticated decentralized finance (DeFi) apps to funky non-fungible tokens (NFTs).

Currently trading at $1,560 after a price surge yesterday, Ethereum now trades near its highest ever price in its five-year history. Its previous high was around the $1,350 level in January 2018.

And it is not only retail investors driving the prices. A filing released by institutional crypto fund manager Grayscale yesterday shows its ‘Ethereum Trust’ product, a publicly traded product that holds an underlying value of ETH,grew by $38 million yesterday as it reopened for business. This brings its total holdings above the $4.2 billion mark.

Ninos Mansor, a partner at crypto fund Arrington XRP Capital, said that some upcoming catalysts driving ETH prices upwards were the rising adoption of DeFi apps and the huge amounts of ETH locked up in “staking” as the blockchain shifts towards a proof-of-stake consensus mechanism.

He added the reopening of Grayscale’s Ethereum Trust was a potential “black hole” for the asset. This is because coins are getting locked up for long periods of time, meaning they can't be sold to depress the price. Essentially this could end up reducing the amount of liquidity on exchanges—which is continuing to drop.

$25,000 ETH option

As Ethereum's price rises, some traders are betting for even higher prices. Data from on-chain analytics app skew shows the ‘open interest’ on Ethereum futures—a term for the outstanding positions for trades taken on the asset—shot up nearly 40% last night, hitting a record total of $5.4 billion.

The figure means traders have yet not closed their positions on options or futures—both separate types of financial contracts used by market speculators to bet on prices of a certain asset—in anticipation of bigger price movements in the near future.

Seeing the bets, options exchange Deribit even launched a new contract for Ethereum on Tuesday—an option that would see each Ethereum sold at $25,000 on December 21 this year. Traders can purchase this for a low cost today, potentially gaining a huge amount if they are right.

According to current prices, that would be an increase of 1,500% to Ethereum's price within the next year. But is anyone truly that bullish?