Data shows that Ethereum Open Interest saw a sharp rise before the price of the cryptocurrency saw a decline 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 in its first three days, but Thursday brought a change as the broader market retreated.
Ethereum had managed to climb back above $2,150, but following this drop, its price returned to near $2,000.
In terms of 24-hour percentage change, the ETH price saw returns of almost -5%, worse than Bitcoin’s 3% decline, but better than the losses recorded by some altcoins.
Data on derivatives markets may already be pointing to this volatility.
Open interest in ETH surged on Wednesday
As CryptoQuant community analyst Maartunn pointed out in an article yesterday, Ethereum saw a sharp increase in open interest alongside the recovery rally. “Open Interest” here refers to an indicator that measures the total amount of ETH-related derivatives market positions that are currently open on all centralized exchanges.
When the value of the indicator increases, it means that investors are opening new positions related to cryptocurrency. Typically, total leverage in the market increases when new positions appear, so an increase in open interest can lead to greater volatility in the asset price.
On the other hand, the decline in the metric implies that investors close their positions of their own accord or are forcibly liquidated by their platform. In both cases, the market may become more stable due to the collapse of leverage.
Below is the 24-hour chart of Ethereum open interest that Maartunn shared on Wednesday.
As the chart shows, Ethereum Open Interest increased by 7.1% as the price surge continued, implying that new positions appear to be riding the wave. In the chart, the analyst also highlighted past instances of sharp rises in the metric. It would appear that many of these events coincided with local peaks in the asset. “This setup plays out about 75% of the time,” Maartunn noted.
Given this trend, it is perhaps not surprising that Ethereum opened with a price drop on Thursday. The pullback meant investors who rushed to bet on another bullish outcome were squeezed out. In total, ETH has seen liquidations of over $94 million over the past day, according to CoinGlass data.
From the heat map, it is clear that Ethereum liquidations were the largest in the cryptocurrency sector, with Bitcoin this time coming in second with $83.8 million worth of contracts involved.
