- Ethereum could be exposed to volatility as open interest and appetite for leverage explodes.
- Determining why prolonged liquidations are huge when prices retreat in favor of the bears.
Ethereum [ETH] has received new attention this week, and nowhere is that more evident than in its open interest. This comes amid a resurgence of bullish activity over the weekend.
The open interest of the altcoin king has registered a significant spike in the past 24 hours. This is the most active in the past five months and requires deeper investigation into what it means for ETH.
The fact that this is the fastest rally since May suggests that ETH could be headed for further volatility.
Source: CryptoQuant
The surge in open interest coincides with ETH's growing appetite for leverage. Ethereum’s estimated leverage ratio has also achieved a sharp increase in the past 24 hours, allowing it to approach its 2024 high.
Source: CryptoQuant
The increase in the estimated leverage ratio, coupled with the increase in open interest, suggests that there has been high activity in the derivatives market.
This also means that Ethereum is now exposed to more liquidations and directional fluctuations.
Is Ethereum headed for further liquidation?
A sharp rise in both indicators does not necessarily confirm that the market is shifting in either direction. However, ETH price increased by 6.53% during trading on October 14th.
This suggested that leverage and open interest were in favor of the bulls.
Source: CryptoQuant
ETH’s recent rally has once again pushed the cryptocurrency into a short-term resistance zone. At the time of writing, the price was trading at $2,615.
There is a fair chance of increased selling pressure, especially if Ethereum breaks into the $2,700 range.
The current rally may raise expectations that the rally will be prolonged, further increasing appetite for leverage. This creates the potential for ETH to be liquidated if the price drops unexpectedly.
Another potential outcome is that prices could rise due to an extension of the recent strong demand that emerged over the weekend.
Speaking of liquidations, it was observed that Ethereum long liquidations peaked at $135 million on October 1st. It then fell to $2.46 million as of October 14th.
Meanwhile, short-term liquidations peaked at more than $49 million in the past 24 hours.
Source: CryptoQuant
read ethereum [ETH] Price prediction for 2024-2025
Since then, the short-term liquidation amount has plummeted to the $220,000 level, indicating a major change due to a bullish turn in price. This confirms that the shift was in favor of longs.
Therefore, they are exposed in case there is an unexpected pullback.
