Ether’s price has struggled in recent weeks, dropping 6% between March 19 and March 21 after failing to break past the key $2,050 resistance level. Since February 21, ETH has declined by 28%, a sharper drop than the broader crypto market, which fell only 14% over the same time. Despite this downturn, there's a surprising development in Ethereum’s derivatives market: open interest in Ether futures has reached a new all-time high, raising questions about investor sentiment and future price action.

On March 21, open interest in ETH futures surged to a record 10.23 million ETH, marking a 15% increase over the past two weeks. This surge, seen as a key indicator of leveraged trading interest, has led many traders to speculate on whether big investors are positioning for a potential rebound toward $2,400. However, the increase also raises the risk of cascading liquidations if the market moves sharply in either direction.

Data from CoinGlass shows that Binance, Gate.io, and Bitget collectively hold over half of this open interest, while the CME—often viewed as the institutional gateway to crypto—holds just 9%. This is in stark contrast to Bitcoin futures, where CME commands a 24% market share. This skew in ETH futures may reflect different levels of institutional confidence between the two assets.

Yet, not all indicators are flashing green. The futures premium—a measure of how much more expensive futures contracts are compared to spot prices—has dropped below 4%, down from 5% two weeks ago. In normal market conditions, this premium sits between 5% to 10% annualized. The lower premium indicates a drop in demand for leveraged long positions, suggesting that traders are hesitant to bet aggressively on upward price movement.

Another concerning sign for Ether’s near-term outlook is the weak performance of U.S.-based Ether ETFs. Over the past two weeks, these investment vehicles have seen $307 million in net outflows, signaling waning institutional demand. On top of that, macroeconomic concerns continue to loom large. Fears of a global recession, inflationary pressures, and spending cuts by the U.S. government are prompting investors to adopt a risk-off approach, leaving ETH in a precarious position.

Compounding these issues is a decline in Ethereum’s network fees. While lower fees can be a positive sign for end users, they also reduce incentives for validators, potentially undermining network security and decentralization. Martin Köppelmann, co-founder of Gnosis, has pointed out the growing misalignment between validator compensation and the growth of decentralized applications and layer-2 scaling solutions.

In essence, while the record-high futures open interest might appear bullish on the surface, the broader picture suggests caution. With diminishing ETF flows, reduced futures premiums, and network-level concerns, ETH’s road to recovery may be more uncertain than open interest figures alone suggest. The market will be watching closely to see if this leverage buildup leads to a rally—or a reset.