The cryptocurrency market is currently experiencing a notable shift as Ethereum (ETH) open interest has plummeted to levels not seen in three years. This decline, highlighted by a fall of approximately 75 million ETH across major exchanges, suggests that traders are opting to reduce their leveraged positions instead of initiating new trades.
Recent data shows that Binance led the charge with a staggering decline of around 40 million ETH over the past month. Other exchanges, including Gate, Bybit, and OKX, contributed to the downturn with reductions of over 20 million ETH, 8.5 million ETH, and 6.8 million ETH, respectively. Such widespread withdrawal from leverage trading indicates a cautious sentiment among traders, possibly cleaning up weaker positions and minimizing the chances of forced liquidations in the future.
Analysts from CryptoQuant have identified this significant drop in open interest occurring alongside falling prices as a potential precursor to market stabilization. They noted that the current environment could foster a more solid price base for Ethereum, allowing for a recovery phase after a period of bearish sentiment.
Adding to the bearish landscape, Ether futures funding rates on Binance have sunk into negative territory, reaching -0.006, the lowest since December 2022. This figure underscores an extreme level of pessimism among traders, which historically has correlated with price rebounds. When market participants are overwhelmingly bearish, a short squeeze can occur as prices unexpectedly rise, leading to the liquidation of late short positions.
Moreover, rising network activity on the Ethereum blockchain and increased inflows from institutional investors could provide the necessary momentum for short-term price gains. Currently, the ETH/USD pair has broken out of a falling wedge formation on the four-hour chart, trading at $2,050. Analysts suggest that the measured target from this breakout could see prices reach $2,150, with further potential to test levels around $2,260 and eventually $2,500.
A critical support level to monitor is the psychological threshold of $2,000, which aligns with the 50-period simple moving average. The Glassnode cost basis distribution heatmap indicates a significant support zone has recently formed between $1,880 and $1,900, where investors have accumulated approximately 1.3 million ETH.
As Ether”s price fluctuates, accumulation addresses are seeing a surge in daily inflows, particularly after ETH dipped below $2,000 last week. This trend showcases strong investor confidence in Ethereum”s long-term potential, despite the current volatility in the market.
While this article provides insights into Ethereum”s current situation, it does not constitute investment advice. Every trading decision carries risks, and readers are encouraged to conduct thorough research before making any financial commitments.
