Several large-cap assets, including bitcoin and ethereum, struggled to make their mark last week as the broader market suffered a sharp price decline. According to various analyses, the market was negatively impacted by some recent macroeconomic developments in different countries.
This significant drop has had a widespread effect on market sentiment, with most investors now acting cautiously. This can be seen in the recent drop in ethereum open interest, which could have serious implications for the price of eth.
ethereum Open Interest Drops by $6 Billion: Impact on Price?
According to the latest data crypto-weekly-report” target=”_blank”>report According to blockchain analytics platform CryptoQuant, ethereum open interest has dropped by more than 40% (roughly $6 billion) in the month of August. The “open interest” metric refers to an indicator that measures the total number of derivatives positions of a cryptocurrency (eth, in this case) currently open across all centralized exchanges.
A increase in the value of this indicator This implies that investors are opening new positions in the futures and options market at that time. It basically indicates that investors are putting money into eth derivatives at that time. When the metric drops, on the other hand, it means that derivatives traders are closing their positions or getting liquidated in the market.
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As shown in the chart above, ethereum open interest has been on a downward trend since early August, bottoming out on Monday following the broader market decline. According to data from CryptoQuant, eth open interest stands at around $7.67 billion, at the time of writing.
Although it has shown some good signs of recovery over the past day, low open interest does not look healthy for the ethereum price, especially when looking at it from a historical perspective. Declining positions in derivatives markets could lead to a drop in liquidity, which could lead to substantial price fluctuations due to market inefficiency.
At the same time, the drop in open interest could reduce volatility in the ethereum market in the short term, especially as fewer investors are betting on the price of eth. Low volatility suggests that the price of ethereum might not experience any major movements in the near future.
eth price at a glance
At the time of writing, ethereum’s price is still hovering around the $2,600 mark, reflecting a drop of nearly 4% over the past 24 hours. According to data from CoinGecko, the altcoin’s value is down more than 13% over the past seven days.
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