The data shows that a significant amount of leverage is accumulating in the Ethereum futures market as the cryptocurrency has crossed $2k.
Open interest on Ethereum has risen to the highest value in the last 4 months
As pointed out by an analyst at CryptoQuant MailRecently, the Ethereum futures market has seen a sharp rise in leverage.
The “frank interestIt is an index that measures the total number of Ethereum futures contracts currently open on all derivatives exchanges.
When the value of this metric goes up, it means that investors are opening more positions in the market at the moment. As more futures positions indicate that leverage is also rising in the market, this trend may lead to higher volatility in the price of the currency.
On the other hand, low index values indicate that stock holders are closing their positions at the moment. This kind of trend could lead to a less volatile value for ETH.
Now, here’s a chart showing the trend in open interest in Ethereum over the course of 2022 so far:
Looks like the value of the metric has shot up in recent days | Source: CryptoQuant
As you can see in the chart above, open Ethereum has noticed some sharp upside over the past two weeks.
The index has now reached a value of 7.4 billion, its highest level over the past four months. However, there is an interesting comparison here.
About 4 months ago, when these values were previously observed, the price of ETH was around $3.3K. But the price today is only $ 2 thousand, which is about 1.3 thousand dollars less than it was at the time.
However, the open interest is at the same level, which means that the Ethereum market may have the same degree of leverage this time as well, while the price is much lower.
When a particularly high leverage accumulates in the futures market, any sharp price swing can lead to the liquidation of a large number of positions simultaneously. This liquidation then amplifies this price action, causing more positions to be liquidated.
In this way, the filters can be successively cascaded together, and the event is called “filter pressure. This is the reason for the over-leveraged market volatility.
If we end up with a long press this time, the recent rally in ETH value may reach the breaks.
ETH . price
At the time of writing this report, Ethereum price It is floating around $1.9K, up 5% in the past week.
The value of ETH seems to have gone up during the last few days | Source: ETHUSD on TradingView
Featured image from Kanchanara on Unsplash.com, charts from TradingView.com, CryptoQuant.com