The Ethereum price has further declined by 2%, resulting in the liquidation of approximately $10.06 million in long positions. Data from Santiment reveals that the supply of ETH on exchanges has decreased by approximately 110,000 ETH within the past 24 hours, dropping from 10.77 million to 10.66 million.
If Ethereum were to break and close below the $1,585 mark, it could spell trouble for short-term holders, potentially leading to further losses down to $1,551, which were the lows observed in mid-August. Ethereum (ETH) has been on a downward trajectory for the fourth consecutive day, forming a dome-like pattern as it retraces all the gains it made during the late September rally. On-chain data suggests that profit takers are showing no signs of restraint.
Profit-taking in Ethereum persists.
Ethereum (ETH) has experienced a nearly 2% decline in price over the past 24 hours, which, although seemingly small, has resulted in the liquidation of more than $10 million worth of long positions.
Open interest and trading volume have decreased from the $6.07 billion recorded on August 5 to the current figure of $5.28 billion. This signifies a 15% decline in the overall number of both long and short positions and the trading volume for this asset over the course of two months.
This indicates a notable outflow of capital from the Ethereum (ETH) market, with fewer new contracts being traded as a result of the recent price movement in Ethereum.
Frequently Asked Questions (FAQs) about Open Interest and Funding Rate
How does Open Interest affect cryptocurrency prices?
Greater Open Interest is linked to increased liquidity and the infusion of new capital into the market. This is seen as a boost in efficiency, and the current trend reflects this. Conversely, a reduction in Open Interest is seen as an indication of market liquidation, with investors departing and overall asset demand declining, which contributes to a bearish sentiment among investors.
How does Funding rate affect cryptocurrency prices?
Funding fees act as a mechanism to align spot prices with the prices of futures contracts for an asset, thereby heightening the liquidation risks encountered by traders. A consistently elevated and positive funding rate suggests a bullish sentiment prevailing among market participants, anticipating a potential price increase. Conversely, a consistently negative funding rate for an asset signifies a bearish sentiment, signaling that traders expect the cryptocurrency’s price to decline, and a reversal towards a bearish trend is likely.
Analysis of behavior, data from Santiment
Information from the behavior analytics platform Santiment supports this pattern, indicating that the supply of ETH on exchanges has decreased by approximately 110,000 ETH within the past 24 hours, dropping from 10.77 million to 10.66 million. At the present valuation, this amounts to roughly $177.87 million.
What does this mean for the market’s strength?
As of the current moment, Ethereum is priced at $1,615, and the price movement closely resembles the rally observed from September 28 to October 1. The Relative Strength Index (RSI) positioned below the midline indicates a persistent short-term downtrend, which is further supported by a breach below the demand zone at $1,585. Should there be a definitive daily candlestick closure below this threshold, it could potentially drive ETH towards the lower boundary of the range at $1,551.
On the contrary, if the demand zone effectively serves as a solid support range spanning from $1,603 to $1,569, there is potential for Ethereum’s price to pivot around it and initiate an upward movement. This could involve reclaiming the $1,648 resistance level and, in an extremely bullish scenario, pushing beyond the previous equal highs at $1,736.
Meanwhile, research suggests that the market may be showing signs of strengthening even as prices, volume, and open interest decline. As prices, volume, and open interest decrease, traders holding long positions may become discouraged, leading to potential liquidations. As long as this trend persists, it indicates a bearish sentiment. However, once open interest stabilizes at a low level, the liquidation phase may come to an end, and prices could then be positioned for a potential rally.