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Ethereum price has seen a remarkable run over the past week, returning above the $3,500 level for the first time since July 2024. This single-week performance represents a shift in the fortunes of the “ king of altcoins”, which has slowed down somewhat. after a good start to November.
Although Ethereum’s current price pattern suggests that there is still room for upward movement, some on-chain signals indicate that the market could be on the verge of a pullback. One such signal is the open interest in ETH, which recently hit a new all-time high.
Is ETH Price Threatened by Rising Open Interest?
In a Quicktake article on the CryptoQuant platform, an analyst under the pseudonym ShayanBTC revealed that while Ethereum’s price trajectory appears bullish at the moment, investors should exercise caution. This projection is based on the “alarming divergence” in ETH futures market metrics.
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Specifically, the relevant futures market metric here is open interest, which tracks the total amount of open futures or derivatives contracts of a particular cryptocurrency (ETH, in this case) in the market at any given time . It basically evaluates the amount of money invested in Ethereum futures at any given time.
According to data from CryptoQuant, Ethereum open interest has reached a new all-time high value of $17 billion. Typically, a rise in open interest signals a change in investor sentiment, with traders increasingly speculating and preparing for a potential market move.
ShayanBTC noted, however, that the notable rise in open interest was not accompanied by a new all-time high for Ethereum price. According to the Quicktake expert, this divergence between price and open interest portends a potential increase in volatility and significant liquidation cascades.
ShayanBTC added:
If Ethereum’s price faces a sudden slowdown or consolidation, futures traders’ overleveraged positions could trigger a wave of forced liquidations, causing prices to fall rapidly.
At the time of writing, Ethereum price sits just below $3,700, reflecting an increase of over 3% in the past 24 hours. According to data from CoinGecko, the value of the altcoin has increased by almost 8% over the past seven days.
Ethereum whales load their bags
Fortunately, other on-chain data has emerged to counter the bearish prognosis for the second-largest cryptocurrency. In a November 30 article on Platform X, prominent cryptocurrency analyst Ali Martinez revealed that a particular class of large Ethereum investors were active in the market.
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Data from CryptoQuant shows that Ethereum whales holding between 100,000 and 1,000,000 coins have purchased over 280,000 ETH in the last four days. This level of buying activity from such an influential investor class could be considered bullish for the altcoin.
Featured image created by DALL-E, chart by TradingView
