Ethereum Open Interest (OI) had experienced a meteoric rise in the weeks leading up to the Ethereum merger. Even after the merger, open interest hasn’t diminished given all the new interest from institutional investors following the network’s move to a proof-of-work mechanism. This time around, Ethereum’s open interest has reached another important peak that hints at a possible ETH price rally.
Open interest hits $7.7 billion
Ethereum open interest still remains high despite ETH dropping to the low $1,000s in September. Data shows that open interest in ETH has reached $7.7 billion this week, although traders often choose to avoid trades at the end of the quarter, even in the crypto market.
This means there is now $7.7 billion of open interest for futures, but the majority of it has actually shifted towards the bearish side. Given that the crypto market has only been in its bear market for just under a year, it is not surprising that investors are expecting another drop to follow.
ETH stable above $1,300 | Source: ETHUSD on TradingView.com
Investor sentiment has also been hit since mid-September when the long-awaited merge upgrade failed to spark a rally in ETH price. The ensuing drop had caused investors to start taking profits to avoid further losses while closely monitoring the market. The same is now happening in the futures markets.
Will Ethereum (ETH) Recover?
A large amount of open interest tends to have some positive implications for the digital asset. The reason for this is that so many traders are taking increasingly bearish positions on Ethereum from this point, which means there is a possibility of a short squeeze should the price break out from here.
Now, given the declines in various areas, not much recovery can be expected for the crypto market. But if the Fed heeded the advice and stopped raising rates in the short term, then macro markets would likely rally, taking the crypto market down.
The next FOMC meeting is expected to take place in early November, which is less than a month away. There are currently predictions of further rate hikes that would be negative for crypto assets like Ethereum.
Currently, the bulls are focused on pushing the price back high enough to retest the $1,500 resistance. However, as selling pressure continues to mount, don’t expect ETH to reach this price any time soon.
Featured image from Crypto News Flash, chart from TradingView.com
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