Ethereum’s long-term structure exposes the consequences of the leverage massacre. Open Interest collapsed, reflecting a widespread sell-off in the futures markets. With leverage depleting and traders reeling, the path forward depends on whether spot demand can fill the void left by the collapse of IO.
Recent market volatility has presented a crucial opportunity to assess the underlying health of various crypto assets. In an X jobDaan Crypto Trades, a full-time crypto trader and investor, offered a compelling analysis of Ethereum’s long-term chart, focusing specifically on Open interest (OI), which shows exactly to what extent speculative excesses have been eliminated. In particular, ETH was hit hard in the process.
Why this flush could be the basis of Ethereum’s next move
What is encouraging, according to Daan, is that ETH open interest is now at levels comparable to when ETH was trading at $3,000. Meanwhile, the price is now hovering around $4,000. For Daan, a simple rule to determine if a healthy reset has occurred is whether open interest is lower than it previously was at a specific price.
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Typically, as prices rise, open interest tends to increase as more capital flow in derivatives markets, and vice versa. This relative comparison of OI and price is crucial because an increase or decrease in price will generally move the IO in both directions.
There are also coins used as margin, which can inflate OI figures in a rising environment. walk. Thus, the relative levels to watch are between OI and prices, which carry more weight than absolute figures.
In the meantime, leverage is making a comeback on the Ethereum market. As the Master of Crypto, observer of market dynamics, said highlightedETH open interest surged 8.2% in 24 hours, fueling the current price trend. The rise in open interest suggests traders are once again opening aggressive long positions after the recent surge, a familiar pattern that often carries more risk than reward.
Master of Crypto advises caution, framing this leverage-based approach rally In a historical context, about 75% of rallies fueled aggressively by such rapid accumulation of debt tend to reverse, while only 25% maintain their upward momentum.
The calm phase before the next expansion
Ethereum’s macro trend remains up despite the short-term movement. Analyst EtherNasyonaL has underlines that after breaking free from its long-standing downtrend, ETH is currently only retesting the demand zone and trendline, a retest of healthy upward movement that is typical of a strong market structure.
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However, the analyst pointed out that the fluctuation on short time frames does not define the trend, but it is the longer time frames that hold the true directional signal. Currently, “the ETH macrotrend is still upand the whole situation has not yet been discussed.
Featured image from Pixabay, chart from Tradingview.com
