Journalist
Posted:
- ETH fell below $2,077, a level where the TWAP trading strategy ended.
- About $91 million worth of longs were liquidated in the past 24 hours.
Ethereum [ETH] retreated as the weekend came to a close, but the second-largest cryptocurrency by market cap was still hovering around the $2,000 mark.
As of this writing, ETH was exchanging hands at $2,045, following double-digit gains in the past month, AMBCrypto discovered via CoinMarketCaps facts.
However, the asset could see a spike in volatility in the coming days, possibly culminating in a price drop.
The events in the ETH derivatives market
Popular crypto market researcher and author at CryptoQuant, Maartuntook to social platform X (formerly Twitter) to draw attention to his analysis supporting the above claim.
A few days ago, the analyst discovered a buying trend in ETH, driven by the Time Weighted Average Price (TWAP) strategy. For the uninitiated, TWAP involves dividing a large single order into smaller quantities, each of which is fulfilled at regular intervals.
Doing this reduces the impact of a large transaction, preventing sudden fluctuations.
The systematic buying resulted in linear growth in the open interest of ETH futures contracts, Maartunn had stated in a November 22 post.
It was pushed back to November 27 and the CryptoQuant analyst predicted “significant volatility” for ETH in the coming days.
According to the research, the TWAP purchase started at $1929 and ended at $2077, with ETH adding more than $900 million to its Open Interest.
Source: @JA_Maartunn on X
However, ETH’s dip below $2,077 in the past 24 hours started to put pressure on positions. When the market moves against one’s leverage position, the risk of liquidation increases significantly.
In this case, the long position traders who bought through the TWAP strategy were at risk of forced liquidations. The domino effect would further drive down the price of ETH, Maartunn argued.
Realistic or not, here it is The market cap of ETH in terms of BTC
Traders are turning bearish on ETH
The consequences were announcing their presence at press time. Notably, approximately $91 million worth of long positions in ETH futures were liquidated in the past 24 hours, AMBCrypto noted via Mint glass‘ facts.
The liquidations led to a shift in market sentiment. The number of traders with long positions fell sharply compared to those on the short side.
Source: Coinglass