A quant has explained how a pattern currently forming in ethereum open interest could imply that altcoin season will arrive “sooner than expected.”
Altcoin Season May Approach Soon Based on ethereum Pattern
In a quick shot from CryptoQuant ethereum-is-surpassing-is-altcoin-season-approaching” target=”_blank” rel=”nofollow”>mailAn analyst has discussed why an altcoin season could be coming soon for the cryptocurrency sector, based on a trend occurring in a pair of ethereum and bitcoin indicators.
The first relevant metric here is “open interest,” which tracks the total number of derivatives positions related to a given asset currently open across all centralized exchanges.
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When the value of this metric increases, it means that speculators are opening new positions for the coin at the moment. On the other hand, a decline implies that users are closing their positions of their own volition or are forcibly liquidated by their platform.
Now, here's a chart showing how the open interest trend between bitcoin and ethereum compared over the past year:
As shown in the chart above, bitcoin open interest has been moving more or less sideways recently, while at the same time, the metric has recorded growth for ethereum.
This would suggest that eth has recently seen more appetite for derivatives market contracts than the original cryptocurrency. One of the factors driving this could be the news cycle related to the approval of spot exchange-traded funds (ETFs) for the asset.
In the same chart, the quant also attached the data of another indicator: the estimated leverage ratio (ELR). This metric measures the relationship between the open interest and the exchange reserve of any asset. The latter is, naturally, the total amount of the currency currently held in the wallets of all centralized exchanges.
Basically, the ELR gives us information about the amount of leverage that the average user is opting for in the derivatives market at the moment. From the chart, you can see that this ratio has seen an increase for ethereum recently, but has shown a flat action for bitcoin.
Therefore, it appears that not only has eth seen more speculative interest than btc recently, but these users who open contracts are taking on greater risks as they are taking on more leverage.
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The analyst believes that the fact that ethereum has surpassed bitcoin on these indicators could be a potential sign that an altcoin season is coming soon.
“If ethereum price continues to consolidate in the current range, it is quite possible that the altcoin season will begin earlier than expected,” the quant notes. It now remains to be seen how things will develop in the market in the near future, given this change in trend.
eth price
After seeing a slowdown earlier, ethereum has returned to normal in recent days as its price has now climbed back above the $3,900 level.
Dall-E Featured Image, CryptoQuant.com, TradingView.com Chart
