Ethereum derivatives trading grew about 10% over the last month in anticipation of the Merge, taking up to 57% of the combined bitcoin and ether futures trading volume.

In the past 24 hours alone, over $35 billion in ether futures was traded, compared to $32 billion in bitcoin futures. Furthermore, the open interest, or the number of ether contracts that have not been settled, has almost doubled to $8.43 billion this week. For the month of Sep. 2022 to date, the total derivatives volume traded for ether is around $87 billion, compared to roughly $67 billion for bitcoin, data from Coinglass shows.

Futures contracts are agreements to buy or sell an asset at a predetermined price sometime in the future. In the case of ether futures, ether becomes the asset. Contracts can be settled either through physical delivery or cash transfer. For example, when a futures contract expires, the buyer can receive physical ether from the seller, or they can accept cash, settling the contract.

According to an analyst from Kaiko, a provider of crypto trade data, most traders are definite strategies in light of the upcoming Merge. Investors are taking up short positions, suggested by funding rates data, anticipating that there could be problems with the Merge while taking up long positions in ether to neutralize price risk. Funding rates are payments made by traders based on the difference in price between a futures contract and the spot price of its underlying asset. A negative funding rate indicates that traders expect the market to go south but also presents a buying opportunity for futures.

Some traders are also making themselves eligible for the airdrop of new tokens from a proof-of-work Ethereum fork that some developers are reportedly working on.

If the Merge is successful, this will result in a slower issuance pattern for Ethereum, reducing the number of ether in circulation and eventually driving up the price. This deflationary action could reduce the volume of investors holding short positions as prices rise, bringing down the current driver of futures trading.

While bitcoin’s future is not tied to any software upgrade, the prolonged bear market could see an increase in short positions in the near term.

But institutional interest in bitcoin has been growing amid the bear market. BlackRock, the world’s largest asset manager with over $1 trillion in assets under management, recently launched a spot bitcoin private trust for institutional clients. One industry CEO believes this is a sign of how much cryptocurrency has matured as an asset class.

The Chicago Mercantile Exchange recently launched euro-denominated bitcoin and ether futures products.

VanEck filed an application to launch a spot bitcoin Exchange Traded Fund in July, which the Securities and Exchange Commission has delayed. Grayscale, which operates an Ethereum trust, recently filed a lawsuit against the SEC for rejecting the conversion of its bitcoin trust to a spot ETF.

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