A recent observation by a well-versed CryptoQuant analyst has it that Ethereum has experienced a significant shift in its market dynamics over the last few trading sessions.
The rally also came as a relief given Ethereum’s over 18% drop in the last week, its biggest weekly drop since March and driven by large speculators putting profit ahead of huge losses after the OI reduced from $13 billion to $11.5 billion.
Open Interest (OI), for those who do not know, is a measure of the total number of derivative contracts that have not been settled. An increase in OI means more open money is entering the market, and that builds hopes for increased trading activity, thus volatility as well.
Historical Highs and the Cooling Phase
As the rollercoaster 2021 bull run persisted, Ethereum OI swayed from $9.5 billion all to reach a fruitful zenith alongside an all-time high price of $4,891 per asset. This price peak was not renewed in the current bullish cycle; however, OI skyrocketed to hit an all-time high OI of $13 billion.
The spike represented an overbought market yesterday, which had become vulnerable to selling pressure during the accumulation frenzy of leveraged longs.
As expected, the aftermath of the unprecedented OI was a volatile one. Ethereum started facing a vicious wave of liquidations (Figure 1) after June 5 2024 when the **leverage in the market became too excessive.
However, within a mere week, $400 million of Ethereum positions were liquidated, with the large long portion losing out to the tune of $285 million whereas shorts got more than $113 million in their favor being settled. This quick book-squaring of leveraged positions has led OI lower over the past week, seeing a decrease in excess of $1.5 billion.
Market Recovery and Forward Outlook
But despite the shakeout, Ether is giving a hint of a comeback and resisting. The crypto has moved up 1.5% over the past 24 hours, leading to speculation that it could temporarily consolidate.
PRICES: Ethereum was bouncing at $3,585 after building a base above that psychological and technical level of $3,500. This rebound is important because it comes after a wider 2.5% slide over the course of last week.
