Key Points
- A surge in Ethereum CME Futures indicates renewed institutional interest in Ethereum.
- The potential for an Ethereum ETF that distributes staking rewards could further drive institutional demand and price.
Ethereum has historically trailed Bitcoin, but this trend could change in 2025.
A significant 17% yield opportunity is predicted to attract institutional demand.
Increased Institutional Interest in Ethereum
A recent newsletter by Greg Magadini, director of derivatives at Amberdata, pointed to a rise in Ethereum CME Futures open interest as a sign of renewed institutional interest in Ethereum.
Magadini wrote, “We’re finally seeing an OI buildup in the Ethereum CME futures complex… which might be signaling that US institutions are paying attention to Ethereum finally.”
The Ethereum CME Futures surge began after the November US election, reflecting bullish expectations for the asset and DeFi sector during the new Trump administration.
The total open interest rose from $1.5B to over $4.5B during this period.
The Appeal of Ethereum’s 17% Yield Opportunity
Magadini highlighted the potential for an Ethereum ETF that distributes staking rewards as a major catalyst for Ethereum’s institutional demand and price.
He stated, “What’s very interesting, however, is the potential for an Ethereum ETF that distributes staking rewards to ETF holders. This product would set up a fascinating trade opportunity.”
Currently, staking Ethereum, which involves delegating your token to validators to secure the network, earns about a 3.5% yield per year.
In addition to this, investors can earn an extra 14.5% annualized yield through Ethereum’s basis trade as interest for CME Futures soar.
Ethereum’s ‘basis trade’ refers to the premium collected when traders buy spot Ethereum ETF and simultaneously short the CME Futures.
This strategy yielded as much as 18% APY (annualized percentage yield) in early December but has eased to 13% as of this writing.
The overall Ethereum basis yield and staking rewards could be attractive to institutional players, as noted by Magadini.
He stated, “Trades could gain the +14% APY basis yield AND the 3.5% PoS yield. Together the total yield is about 17% in regulated tradFi products with delta-neutral exposure…If regulation permits Staking Reward distributions, given a new SEC direction, this could be great income opportunities in 2025.”
This could potentially lead to a surge in demand for Ethereum, driving its value higher.
Currently, the king altcoin is valued at $3.6K, with Deribit options traders eyeing $5K and $6K targets for the end-March expiry.
Ethereum’s strongest performance always occurred in the first half of the year. CoinGlass data showed that Q1 and Q2 delivered 83% and 66% returns on average, respectively.
If these seasonality trends repeat, Ethereum could record explosive growth in the next few months.
