Ethereum Market Observes Pileup Of Leverage As ETH Breaks $2k
14 August 2022 - 5:00AM
NEWSBTC
Data shows a large amount of leverage has been piling up in the
Ethereum futures market as the price of the crypto breaks above
$2k. Ethereum Open Interest Surges To Highest Value In Last 4
Months As pointed out by an analyst in a CryptoQuant post, the ETH
futures market has seen the leverage sharply going up recently. The
“open interest” is an indicator that measures the total number of
Ethereum futures contracts currently open in all derivatives
exchanges. When the value of this metric rises up, it means
investors are opening up more positions on the market right now.
Since more futures positions imply that leverage is also going up
in the market, such a trend can lead to higher volatility in the
price of the coin. On the other hand, lowering values of the
indicator suggest holders are closing up their positions at the
moment. This kind of trend can result in a less volatile value of
ETH. Related Reading: Bitcoin Bearish Signal: Whales With 1k-10k
BTC Depositing To Exchanges Now, here is a chart that shows the
trend in the Ethereum open interest over the course of 2022 so far:
Looks like the value of the metric has shot up in recent days |
Source: CryptoQuant As you can see in the above graph, the Ethereum
open interest has observed some sharp uptrend during the past
couple of weeks. The indicator has now reached a value of 7.4
billion, the highest it has seen during the last four months.
However, there is an interesting comparison here. Related Reading:
New Findings Shows Institutional Investors Take More Interest In
Ethereum Around 4 months ago, when such values were previously
observed, the price of ETH was about $3.3k. But today the price is
just $2k, around $1.3k less than it was back then. And yet, the
open interest is at the same level, meaning the Ethereum market
might be having the same degree of leverage this time as well,
while the price is much lower. When especially high leverage
accumulates in the futures market, any sharp swing in the price can
liquidate a large number of positions at once. These liquidations
then further amplify this price move, which liquidates more
positions. In this way, liquidations can cascade together, and the
event is called a “liquidation squeeze.” This is the reason behind
the volatility of an overleveraged market. If a long squeeze does
end up taking place this time, then the latest rally in the value
of ETH may hit the breaks. ETH Price At the time of writing,
Ethereum’s price floats around $1.9k, up 5% in the past week. The
value of ETH seems to have gone up during the last few days |
Source: ETHUSD on TradingView Featured image from Kanchanara on
Unsplash.com, charts from TradingView.com, CryptoQuant.com
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