Ethereum’s high timeframe structure reveals the effects of a leverage massacre. Open interest has been destroyed, reflecting the widespread liquidation of futures markets. With leverage exhausted and traders weakened, the way forward depends on whether spot market demand can fill the vacuum left by the OI collapse.
Recent market volatility has created a key opportunity to assess the health of various crypto assets. WX postDaan Crypto Trades, a full-time cryptocurrency trader and investor, presented a compelling analysis of the Ethereum chart on a high time frame, focusing specifically on Open interest (OI), which shows exactly how much excess speculation has been flushed out. ETH in particular has been hit difficult in this process.
Why this color could be the basis for Ethereum’s next move
According to Daan, it is encouraging that ETH’s Open Interest is currently at levels comparable to the period when ETH was listed at $3,000. Meanwhile, the price currently hovers around $4,000. For Daan, a elementary rule to determine if a robust reset has occurred is when the number of open interest is lower than before at a certain price.
Typically, as the price increases, the Open Interest value increases with more capital flows to derivatives markets and vice versa. This relative comparison of OI and price is key as it increases or decreases price will generally cause OI to trend in both directions.
There are also coins used as margin that can inflate OI values if they boost market. So the relative levels to pay attention to are between OI and price, which carry more weight than absolute numbers.
Meanwhile, leverage returns to the Ethereum market. Like Master of Crypto, an observer of market dynamics highlightedETH open interest increased by 8.2% in 24 hours, fueling continuous price movement. The surge in Open Interest suggests that investors are re-opening aggressive long positions after the recent flush – a familiar pattern that often carries more risk than reward.
Master of Crypto advises caution when formulating this based on leverage rally Historically, approximately 75% of gains aggressively driven by such rapid increases in leverage tend to reverse, while only 25% maintain upward momentum.
A silent phase before the next expansion
Ethereum’s macro trend remains up despite the short-term move. EtherNasyonaL analyst has he emphasized that after breaking out of a long-term downtrend, ETH is currently merely retesting the demand zone and trendline, which is a robust, bullish retest typical of a forceful market structure.
However, the analyst pointed out that fluctuations over brief time frames do not define a trend, but it is the longer time frames that maintain the true directional signal. Currently, “the ETH macrotrend continues upand the broader perspective has yet to express itself.”
Featured image from Pixabay, chart from Tradingview.com
