Ethereum Open Interest Has Now Risen To $9.7 Billion
As explained by an analyst in a CryptoQuant Quicktake , the Ethereum Open Interest has seen a strong rise recently. The “Open Interest” is an indicator that keeps track of the total amount of ETH-related positions currently open on all derivatives platforms.
When the value of this metric goes up, it means the investors are opening up new positions on the market right now. As new positions generally come with leverage attached to them, the overall leverage in the market rises when the Open Interest does. So, the asset’s price can become more likely to show volatility.
On the other hand, the indicator registering a decline implies the holders are either closing up positions of their own volition or getting liquidated by their platforms. Either way, the reduced leverage can lead to more stability for the cryptocurrency. Now, here is a chart that shows the trend in the Ethereum Open Interest over the past month:As mentioned earlier, an Open Interest increase can lead to more volatility in the price. This is because a mass liquidation event, popularly known as a squeeze, can become more likely to occur if the market is more leveraged.
In theory, this volatility can take Ethereum in either direction. However, the quant has pointed out that the funding rates are currently high, which suggests the sector is leaning towards being long-heavy. Thus, most of the new positions that have popped up on exchanges are likely long. Historically, conditions like these have created a ripe environment for a long squeeze. It remains to be seen how the coin develops in the coming future and whether a sharp correction in its price will occur alongside large long liquidations.