Key Points
- Ethereum’s Open Interest (OI) hits a record high of over $17 billion, indicating increased market activity.
- Despite bullish indicators, historical data suggests potential for price corrections.
Ethereum’s Milestone: A Bullish Signal or a Cause for Concern?
Ethereum [ETH] is steadily approaching the $3.7k mark, marking a noteworthy achievement.
One of its key derivatives metrics, Open Interest (OI), has hit an all-time high, crossing $17 billion.
This surge in OI suggests a rise in traders entering futures or options contracts, indicating a potential influx of money into the market.
An Optimistic Market
Another important derivatives metric, the funding rate, has also seen a significant uptick in recent days.
This increase typically signals an optimistic market, with traders willing to pay more to maintain their long positions.
However, while this might suggest a continuing price rise, historical data paints a different picture.
Past trends show that sharp spikes in open interest often precede price corrections, as witnessed in November 2021 and June 2024.
Will History Repeat Itself?
To determine whether Ethereum is at its market top, a deeper examination of the token’s on-chain data was conducted.
Analysis of CryptoQuant’s data reveals an increasing Ethereum exchange reserve, signaling rising selling pressure.
Furthermore, Ethereum’s stochastic was also in the overbought zone, suggesting a potential rise in sell-offs, which often lead to price corrections.
In addition, Ethereum’s seller exhaustion constant has peaked, a trend that historically results in a significant price drop in the following days.
Interestingly though, the Relative Strength Index (RSI) has yet to enter the overbought position, indicating there may still be room for more buying, which could help Ethereum maintain its bullish momentum.
At the time of writing, Ethereum was testing a support level.
If the RSI is accurate, Ethereum may successfully test this level and continue its upward trend.
However, if the increase in OI and funding rate leads to a price decline as it has in the past, Ethereum could potentially drop to its lower support.
Specifically, a drop from the current price level could push Ethereum down to $3.38k once again.
