Time To Buy Ethereum? Smart Money's View
Close-up photo of Ethereum silver coin (ETH) on black background.
Some might consider the phrase 'smart money' within a crypto investing context to be an oxymoron. But there is plenty of institutional trading interest in digital assets, perhaps in part because for many hedge funds volatility equates to profit making opportunities, even if the trading is irrational.
In fact there are plenty of big, smart institutions trading crypto including Citadel Securities, Susquehanna International and Jane Street Capital that are fully engaged in crypto markets today. Since 2018 the Commodity Futures Trade Commission publishes a weekly Commitment of Traders (COT) report which captures crypto trading trends in an attempt to bring transparency to this sometimes murky market..
THE LATEST COT DATA
In COT analysis, sometimes what's important is the number of derivatives contracts or the notional value of these contracts, and that something can also be the number of firms jumping on a particular trend. The number of what the COT considers 'large' institutional holders varies by contract, but in the crypto world this year there are an average of 38 firms holding long positions in ethereum futures (compared to an average of 74 firms holding long bitcoin futures). Since 2023, the number of firms buying ETH futures has risen ahead of price rallies in the spot market, and has decreased ahead of ETH price selloffs, supporting the hypothesis that smart money is well… smarter than the wider market.
The Forbes analysis of the latest data ending on Mar 25 suggests that smart money considered the price of Ethereum that day ($2,068) as being oversold, and boosted long positions for two of the past three weeks. Ethereum price hasn't budged much since March, so it stands to reason that institutional investors continue to think the time is ripe to buy ETH. Relative to bitcoin and many other crypto currencies eth has been in the dumps. Over the last three years bitcoin's price, even at its current $82,244, has more than doubled while the price of ETH is down 32%.
Though the price of Ethereum could fall further, the futures data indicates that institutional traders believe it could soon trade as high as $2400 - a 22% increase over today's price.
The Number of long ETH Futures Is Rising
WHY IS ETHEREUM SO BATTERED?
Holders of ETH have been unhappy with the development priorities of the Ethereum Foundation, the entity controlling changes to the ethereum protocol. Developers have clamored for speed and cheap transactions for their projects, and they've asked for more Ethereum native projects to build momentum. But what the Foundation has prioritized has been research-driven efforts that align with core values – open source, privacy, security, and censorship resistance – and remaining agnostic about Ethereum-native projects. In October 2024 during the latest ETH San Francisco gathering, there was a burst of optimism and a corresponding rise in ETH driven by Ethereum community's hope that the Ethereum Foundation had seen the error of its ways and would become more responsive going forward. Since then, price has declined to late 2023 levels.
'The level of underperformance [of ETH] relative to BTC and SOL clearly shows that the market is concerned about the relative performance of ETH from here, which is primarily due to concerns about value accrual, protocol revenue and fees, especially since L2s are 'parasitic' to L1 chains.' said recent commentary by Rob Hadick, General Partner at crypto venture firm Dragonfly. 'In addition, there's a general lack of confidence in the Ethereum Foundation's claims that they will ship meaningful upgrades after a number of failed promises.'
Still Hadick believes there is a valid case for buying ETH.
'Ethereum still has an overwhelming advantage in terms of the notional value of TVL, value secured, stablecoins, and RWAs.' says Hadick. 'There is time and potential for them to utilize that advantage to spur more economic activity and reverse the trendline. But, the time is now.'
Trading groups acting on ETH Futures
WHAT SPECIFIC GROUPS ARE BUYING ETH FUTURES?
The COT report does not reveal names of individual trading firms, but does convey what group of entities are more active at a given point. Dealer firms, which are the swap dealers and futures commodities merchants broker dealers owned by banks, boosted 336% their ETH futures contracts from roughly 3,500 the first Tuesday of November to more than 15,000 contracts currently - the election of President Trump has triggered an increased interest among investors for all things crypto. Leveraged firms, which include liquidity makers like and quant trading firms that use leverage as part of their trading strategy, are the main group of institutions that usually sell crypto futures to dealer counterparties that buy them.
Bottom line, the ethereum futures growth story that emerged with President Trump's election continues into 2025, with 11,819 contracts added last year and another 2,700 contracts year to date. The rise in these contracts means that these savvy participants are tying up hundreds of millions and billions for clients or for their own account in anticipation that ethereum demand and its depressed price will rally in the near future.
Appetite for CME ETH Futures
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