Ethereum To See Fresh Move Soon? What Futures Data Says
April 22 2024 - 8:00PM
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Data shows the Ethereum Open Interest has been trading at
relatively low levels recently. Here’s what this could mean for the
asset’s price. Ethereum Open Interest Has Been Moving Sideways
Since Its Plunge As explained by an analyst in a CryptoQuant
Quicktake post, the ETH Open Interest has followed a similar
trajectory as the price of the cryptocurrency recently. The “Open
Interest” here refers to the total number of derivative-related
contracts open for Ethereum on all exchanges. Related Reading:
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Coming Weeks When the value of this metric goes up, it means that
investors are currently opening up new positions on these
platforms. Generally, this kind of trend leads to an increase in
the market’s total leverage, so the asset price could become more
volatile. On the other hand, a decline in the indicator implies the
investors are either closing up their positions of their own
volition or getting forcibly liquidated by their platform. Such a
drawdown may accompany violent price action, but once the drop is
over, the market could become more stable due to the reduced
leverage. Now, here is a chart that shows the trend in the Ethereum
Open Interest over the last few months: The value of the metric
appears to have witnessed a sharp plunge recently | Source:
CryptoQuant As displayed in the above graph, the Ethereum Open
Interest registered a sharp drop earlier alongside the asset’s
price. The plunge in the metric was naturally caused by the long
contract holders being washed out in the price drawdown. As the
price has mostly consolidated sideways since the decline, so has
the value of the Open Interest. The quant notes, This alignment
suggests a cooling down of activity within the futures market.
Consequently, the market appears poised for the resurgence of
either long or short positions, potentially initiating a fresh and
decisive market movement in either direction. Another indicator
related to the derivative market that could be relevant for
Ethereum’s future price action is the funding rate. This metric
tracks the periodic fees that derivative contract holders are
currently paying each other. Related Reading: Bitcoin Mega Whales
Are Buying, Time For Rally To Return? Positive funding rates imply
that the long holders are paying the shorts a premium to hold onto
their positions; hence, that bullish sentiment is dominant.
Similarly, negative values suggest that a bearish sentiment is
shared by the majority of the derivative traders. The chart below
shows that the Ethereum funding rate has recently turned red. The
data for the ETH funding rates over the last few months | Source:
CoinGlass Historically, the market has been more likely to move
against the opinion of the majority, so the fact that the funding
rate has flipped negative may be a good sign for the chances of any
potential uptrends to start. ETH Price Ethereum has gradually
increased over the last few days, as its price has now reached
$3,200. Looks like the value of the coin has gone up a bit over the
past few days | Source: ETHUSD on TradingView Featured image from
Kanchanara on Unsplash.com, CoinGlass.com, CryptoQuant.com, chart
from TradingView.com
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