Ethereum Open Interest Sees Fastest Rise In 5 Months: Brace For More Volatility?
October 16 2024 - 4:30AM
NEWSBTC
Data shows the Ethereum Open Interest has witnessed some sharp
growth recently, a sign that more volatility could be coming for
the asset’s price. Ethereum Open Interest Has Now Risen To $9.7
Billion As explained by an analyst in a CryptoQuant Quicktake post,
the Ethereum Open Interest has seen a strong rise recently. The
“Open Interest” is an indicator that keeps track of the total
amount of ETH-related positions currently open on all derivatives
platforms. When the value of this metric goes up, it means the
investors are opening up new positions on the market right now. As
new positions generally come with leverage attached to them, the
overall leverage in the market rises when the Open Interest does.
So, the asset’s price can become more likely to show volatility.
Related Reading: Ethereum Could Push To $6,000 If This Pattern
Holds, Analyst Says On the other hand, the indicator registering a
decline implies the holders are either closing up positions of
their own volition or getting liquidated by their platforms. Either
way, the reduced leverage can lead to more stability for the
cryptocurrency. Now, here is a chart that shows the trend in the
Ethereum Open Interest over the past month: As the above graph
shows, the Ethereum Open Interest has seen a spike recently as the
cryptocurrency’s price has shown its recovery run. This isn’t
particularly unusual, as rallies tend to attract a lot of attention
and, with such interest, naturally follow a ton of speculation.
However, the scale of the increase could be something to watch out
for. From the chart, it’s apparent that this latest Open Interest
increase has outweighed the September spike. A zoomed-out version
of the chart shows that the last time the metric saw a larger
24-hour rise was back in May. As mentioned earlier, an Open
Interest increase can lead to more volatility in the price. This is
because a mass liquidation event, popularly known as a squeeze, can
become more likely to occur if the market is more leveraged. In
theory, this volatility can take Ethereum in either direction.
However, the quant has pointed out that the funding rates are
currently high, which suggests the sector is leaning towards being
long-heavy. Thus, most of the new positions that have popped up on
exchanges are likely long. Related Reading: Solana Extends Rally By
4%, But This Factor Could Lead To A Top Historically, conditions
like these have created a ripe environment for a long squeeze. It
remains to be seen how the coin develops in the coming future and
whether a sharp correction in its price will occur alongside large
long liquidations. ETH Price At the time of writing, Ethereum is
trading at around $2,600, up more than 8% over the past week.
Featured image from Dall-E, CryptoQuant.com, chart from
TradingView.com
Ethereum (COIN:ETHUSD)
Historical Stock Chart
From Sep 2024 to Oct 2024
Ethereum (COIN:ETHUSD)
Historical Stock Chart
From Oct 2023 to Oct 2024