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  • Writer's pictureSarah Dixon

Ethereum Open Interest Up, Shorts Building?


Ethereum Open Interest Up, Shorts Building?
Ethereum Open Interest Up, Shorts Building?

Data shows the Ethereum open interest has seen a sharp rise recently, a sign that short holders may be piling up on the futures market.


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Ethereum Open Interest Up, Shorts Building?

According to a recent CryptoQuant post, the open interest for ETH has increased while its price has been declining. This pattern has been observed multiple times in the past month. Open interest is an indicator that tracks the total number of Ethereum futures market contracts that are currently open on all derivative exchanges, including both long and short contracts. An increase in this metric indicates that futures market users are opening more positions, which could result in more volatility in the asset's price due to the emergence of more leverage. Conversely, a decrease in the metric's value could lead to a more stable cryptocurrency, as it implies that some holders are closing their futures positions. Below is a chart displaying the trend in Ethereum's open interest over the past month. Ethereum Open Interest Up, Shorts Building?



The value of the metric seems to have registered some rise in recent days | Source: CryptoQuant
The value of the metric seems to have registered some rise in recent days | Source: CryptoQuant

The Ethereum open interest has shown a rapid uptrend in the past few days, as seen in the graph above. However, during the same period, the ETH price has decreased, indicating that the new positions on the futures market may have come from short holders. The chart also shows previous instances where the open interest increased as the cryptocurrency's price fell. This trend occurred three times in the past month, and each time, the asset's value increased after the open interest decreased. The sharp drops in open interest suggest that a "liquidation squeeze" occurred, where a large amount of liquidation took place at once due to a sharp swing in price. These liquidations only provided more fuel for the price move that caused them, resulting in even more liquidations. In the previous instances, a short squeeze occurred, meaning that most of the contracts liquidated were shorts. If the contracts accumulating on the market are indeed short ones, the current open interest rise for Ethereum could follow a similar trend. However, any resulting price volatility would only be temporary, as the price surges in the past month have already shown.


ETH Price

At the time of writing, Ethereum is trading around $1,800, up 2% in the last week.


Looks like the value of the asset has gone down during the past day or so | Source: ETHUSD on TradingView
Looks like the value of the asset has gone down during the past day or so | Source: ETHUSD on TradingView


Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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