- Ethereum may be exposed to volatility as Open Interest and appetite for leverage explode. Determining why long liquidations might be huge in case price retraces in favor of the bears.
Ethereum [ETH] experienced renewed attention this week, and nowhere is that more apparent than in its Open Interest. This comes amid the resurgence of bullish activity during the weekend.
The king of altcoin’s Open Interest registered a large spike in the last 24 hours. It was the most active that it has been in the last five months, warranting a deeper investigation into what it means for ETH.
The fact that it is the fastest spike since May suggests that ETH may be headed for more volatility.
Source: CryptoQuant
The surge in Open Interest aligns with ETH’s growing appetite for leverage. The Ethereum estimated leverage ratio also achieved a sharp uptick in the last 24 hours, and it managed to push closer to its 2024 highs.
Source: CryptoQuant
The estimated leverage ratio’s uptick, combined with rising Open Interest, suggested that there was strong activity in the derivatives market.
It also means that Ethereum is now more exposed to more liquidations, and directional swings.
Is Ethereum headed for more liquidation?
The surge in both metrics does not necessarily confirm which direction the market is shifting. However, ETH price jumped by 6.53% during the trading session on the 14th of October.
This suggested that the leverage and Open Interest were in favor of the bulls.
Source: CryptoQuant
ETH’s latest rally has once again pushed the cryptocurrency into a short-term resistance zone. Price traded at $2,615 at press time.
There is a significant probability that Ethereum could experience a surge in sell pressure, especially if it pushes into the $2,700 range.
The current rally may have triggered expectations of an extended rally, thus encouraging more appetite for leverage. This may also set ETH up for a potential liquidation event, if price unexpectedly pulls back.
Another potential outcome is that an extension of the recent strong demand that manifested during the weekend may push prices higher.
Speaking of liquidations, we observed that Ethereum long liquidations peaked at $135 million on the 1st of October. They have since dropped to $2.46 million as of the 14th of October.
Meanwhile, short liquidations peaked above $49 million in the last 24 hours.
Source: CryptoQuant
Short liquidations have since tanked to the $220,000 range, indicating a massive shift as prices turned bullish. This confirms that the shift was in favor of longs.
They will thus be exposed, in case an unexpected pullback occurs.
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