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Ethereum futures volume and transaction count surpass Bitcoin ahead of the Merge

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(Kitco News) – Things are heating up for the top smart contract platform Ethereum (ETH), which is less than a week away from the last step in its transition to a proof-of-stake, known as the Merge. 

Traders have been preparing to capitalize on the hype around the Merge by piling into Ether derivatives for a potential “buy the rumor, sell the news” type of event, with data showing that the Ether futures market has risen significantly since the beginning of August. 

According to a new report from Tom Rogers, head of research at ETC Group, last month was the “first time since records began that Ethereum futures trading volume surpassed Bitcoin, at $1.07 [trillion] across the month.” 

Ether vs. Bitcoin futures trading volume. Source: ETC Group

That stands in stark contrast to data from the past three years, which shows that “Bitcoin futures volume has generally exceeded its closest rival by a ratio of between 2:1 and 5:1,” the report said. 

August marked only the second time in history that the Ether futures volume surpassed $1 trillion, indicating that interest in Ethereum is rising as the Merge draws closer.  

“More volume means there is greater liquidity in one asset or another, which is desirable from a trading perspective as there are plenty of buyers and sellers. That would suggest Ethereum’s 16% bounce to the upside since 29 August will continue apace,” Rogers wrote. 

Further evidence of rising interest can be found in the transaction count data, which shows that unique Ethereum transactions jumped by 40.3% between Aug. 31 and Sept. 4, surpassing the transaction count for Bitcoin (BTC) on several occasions. 

Data provided by Bitinfocharts shows that on Sept. 4, the total transaction count on Ethereum was 459,451 as compared to 421,019 on Bitcoin. Over the past week, Ether’s price has risen by 7% as compared to a 4% increase for BTC, highlighting the fact that transaction volumes tend to correlate with price movements. 

Taking that into consideration, interest in Ethereum has been outpacing that of Bitcoin since the lows of mid-June, with Ether’s price rising 95% as compared to a 20% increase for BTC during the same period. 

A similar trend was seen in futures data as well, with data from Deribit showing that interest in Ether futures has risen by 70% since mid-July as compared to a 12.9% rise in interest for Bitcoin futures. 

Bitcoin vs. Ether – A long-term view

Insight into the future outlook for Ether price was provided by David Lifchitz, managing partner and chief investment officer at ExoAlpha, who highlighted that Ether “has been able to bounce about 90% off its Summer low while BTC remained stuck near its Summer low.”

Lifchitz pointed to the Merge as the reason for Ether’s outperformance but warned that the outlook after the Merge is unknown as the network will still need to grapple with one of its biggest issues – high transaction costs. 

“A lot of hype has been put into that event, but as the cost of transactions on the Ethereum blockchain with PoS is not expected to be much reduced from the PoW current model, which can at times become highly problematic, it’s anybody’s guess about where ETH price will go after the merge.”

Lifchitz also highlighted the possibility that the Merge might not succeed, rendering the Ethereum blockchain unstable for some time. 

While it currently appears based on testing that the Merge will go down without a hitch, multiple cryptocurrency exchanges are not taking any chances and “have already stopped trading ETH pairs or still allow it on a reduced size until more clarity occurs post Merge.” 

Overall, Lifchitz suggested that the recent gains for Ethereum are more likely due to speculation surrounding the Merge, and are not necessarily representative of how Bitcoin and Ethereum are viewed on a macro scale. 

“Therefore, the gain of ETH over BTC since mid-Summer is highly idiosyncratic and doesn’t reflect the global perception of the crypto market, which is better represented by BTC.”


Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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