Data shows that the Ethereum Open Interest took a sharp jump before the cryptocurrency’s price saw a drop of almost 5% over the past day.
Ethereum has seen bearish price action over the past 24 hours
This week saw some recovery for Ethereum and the broader digital asset sector during the first three days, but Thursday has seen a shift as the market as a whole has retreated.
Ethereum had managed to recover above $2,150, but after this decline the price is back near $2,000.
In terms of 24-hour percentage change, ETH price has seen a return of almost -5%, worse than Bitcoin’s 3% decline, but better than the losses some altcoins have witnessed.
Derivatives market data may have already predicted this volatility.
ETH Open Interest soared on Wednesday
As highlighted by CryptoQuant community analyst Maartunn in an X after Yesterday, Ethereum saw a sharp increase in its Open Interest, in addition to the recovery rally. The “Open Interest” here refers to an indicator that measures the total number of derivative market positions related to ETH that are currently open on all centralized exchanges.
When the value of the indicator rises, it means that investors are opening new positions regarding the cryptocurrency. In general, the total leverage in the market increases when new positions appear, so an increase in Open Interest can lead to more volatility for the price of the asset.
On the other hand, the declining statistic implies that investors are either closing their positions of their own accord or being forcibly liquidated by their platform. In both cases, the market may become more stable as a result of the excesses of debt.
Below is the chart for the 24-hour change in the Ethereum Open Interest that Maartunn had shared on Wednesday.
As shown in the chart, Ethereum Open Interest rose 7.1% as the price surge occurred, implying that new positions seemed to ride the wave. In the chart, the analyst also highlighted previous examples where the metric rose sharply. It appears that many of these coincided with local peaks in the asset. “This setup plays ~75% of the time,” Maartunn noted.
Given this pattern, it is perhaps not surprising that Ethereum opened with a price drop on Thursday. The pullback has washed away investors who had gone in betting on a further bullish outcome. In total, ETH has seen liquidations of more than $94 million in the past day, according to data from MintGlass.
The heatmap shows that Ethereum liquidations have been the largest in the cryptocurrency sector, with Bitcoin in second place this time with $83.8 million in contracts.