Several large-cap assets, including Bitcoin and Ethereum, struggled to make their mark last week as the overall market saw a piercing decline in price. According to various analyses, the market was negatively affected by recent macroeconomic events in various countries.
This significant drop has had a broad impact on market sentiment, with most investors currently treading cautiously. This can be seen in the recent decline in Ethereum open interest, which could have stern implications for the ETH price.
Ethereum Open Interest Drops $6 Billion – Impact on Price?
According to the latest report According to blockchain analytics platform CryptoQuant, Ethereum’s open interest fell by over 40% (around $6 billion) in August. The “open interest” metric refers to an indicator that measures the total number of cryptocurrency derivatives positions (in this case, ETH) currently open across all centralized exchanges.
Some enhance in the value of this indicator means that traders are opening modern positions in the futures and options market at that moment. It basically means that traders are pouring money into ETH derivatives at that time. On the other hand, when the indicator is falling, it means that derivatives traders are closing their positions or are being liquidated in the market.
As shown in the chart above, Ethereum open interest has been on a downtrend since early August, reaching a low on Monday following an overall market decline. According to CryptoQuant data, ETH open interest stands at around $7.67 billion at the time of writing.
While it has shown some good signs of recovery over the past day, the low open interest does not look hearty for Ethereum price — especially from a historical perspective. Reduced positions in derivatives markets could result in a drop in liquidity, which could lead to significant price swings due to market inefficiencies.
At the same time, falling open interest could dampen Ethereum market volatility in the low term, especially as fewer investors are betting on the ETH price. Low volatility suggests that Ethereum price may not experience any major changes in the near term.
ETH price in brief
At the time of writing, Ethereum is still trading around $2,600, reflecting a drop of almost 4% in the past 24 hours. The altcoin is down more than 13% in the past seven days, according to data from CoinGecko.
