Ethereum Breaks $2,900, But Watch Out For Futures Overheating
19 Febrero 2024 - 6:00PM
NEWSBTC
Ethereum has broken beyond the $2,900 level during the past day,
but data shows the futures market may be starting to become
overheated. Ethereum Has Now Broken Through The $2,900 Level While
Bitcoin has slumped to an overall sideways trajectory recently,
Ethereum appears to have decided to pick a path of its own, as the
second largest asset in the sector has surged almost 4% over the
past 24 hours. During this latest jump, Ethereum has touched the
$2,900 mark for the first time since the start of May 2022. The
below chart shows how the coin has performed over the last few
days. The price of the asset appears to have shot up over the past
day | Source: ETHUSD on TradingView Following this rise, Ethereum
investors would now be enjoying profits of more than 16% over the
past week. In the same period, Bitcoin has only put together
returns of about 8%. Related Reading: 16,000 Bitcoin Dormant Since
5+ Years Suddenly Moves, What’s Going On? While ETH’s decoupling
may be an optimistic sign for the asset, a pattern seems to be
emerging that could prove to be a worrying sign. ETH Open Interest
Has Observed A Sharp Increase Recently As explained by an analyst
in a CryptoQuant Quicktake post, the ETH Open Interest has gone
through a strong surge recently. The “Open Interest” is an
indicator that keeps track of the total amount of Bitcoin futures
contracts that are currently open on all centralized derivative
exchanges. When the value of this metric rises, it means that the
investors are opening up fresh positions on the futures market
right now. Generally, total leverage in the sector goes up as more
positions pop up, so this trend can result in a higher amount of
volatility for the cryptocurrency. On the other hand, a decline in
the indicator implies ETH futures contract holders are either
closing up their positions of their own volition, or are being
liquidated by their platform. The asset’s price may behave more
stably following such a decrease. Now, here is a chart that shows
the trend in the Ethereum Open Interest over the last few years:
The value of the metric seems to have rapidly been going up in
recent days | Source: CryptoQuant From the graph, it’s visible that
the Ethereum Open Interest has risen to high levels recently and
has attained a peak that’s higher than any witnessed in almost two
years. “This surge indicates sustained confidence among futures
traders in Ethereum’s current uptrend,” notes the quant. “However,
given the impulsive nature of the recent ascent, traders should
exercise caution and consider the potential for sudden liquidation
events, which could trigger notable short to mid-term price
declines.” Related Reading: Bitcoin Short-Term Holders Just Locked
In $647 Million In Profits As mentioned before, the asset becomes
more likely to show volatility when this indicator rises. The
source of this volatility can be mass liquidation events called
squeezes, which can trigger a violent cascade effect on the futures
market, amplifying the price swing that triggered the event. Since
the Ethereum Open Interest is very high right now, a futures
squeeze could definitely be a possibility for the cryptocurrency.
Featured image from DrawKit Illustrations on Unsplash.com, charts
from TradingView.com, CryptoQuant.com
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