Ethereum Crash Triggers Trader Exodus

Ethereum Crash Triggers Trader Exodus


Ethereum’s open interest drops as traders exit positions following unexpected price crash on May 24, resulting in millions worth of ETH longs being liquidated.

Ethereum (ETH) prices unexpectedly crashed on May 24, sending the coin below last week’s bottom Line towards the $1,800 psychological level. 

As a result of this dump, on-chain data from Coinanalyze outlines that there has been a sharp fall in open interest, suggesting that some traders were caught unaware and had to exit their positions.

Ethereum’s Open Interest Dropping

On May 24, ETH’s open interest stood at $5.2 Billion across all major digital currency exchanges like Binance Crypto exchange and OKX. Out of this, $4.7 Billion were from perpetual futures, while less than $450 Million from futures.

In digital currency derivatives trading, open interest is the total number of open positions. These positions can be long or short and drawn from perpetual futures and futures of leading platforms.

Being derivatives, open interest positions are often leveraged, meaning the trader borrows funds from the exchange to trade a greater lot size. In this way, traders have to allocate collateral, which is margin, to finance the trade. 

Depending on the lot size of the trade and the leverage used, there can be “margin calls”. Here, when the underlying asset’s price moves against their predicated direction, the exchange can sell the collateral to guard itself if the trader doesn’t top up their margin.

On May 24, Ethereum (ETH) prices, aligning with the general tendency across the cryptocurrency markets, dropped approximately 5%, dropping from highs of $1,875 to as low as $1,775. This reversed profits of the past two weeks, forcing the coin lower in sync with losses from late April and early May 2023. 

Following this correction, Coinalyze data shows that the open interest in Ethereum (ETH) positions crashed by 7.3%.

There is now $5.2 Billion worth of Ethereum (ETH) derivatives positions, most of which is in Binance Crypto exchange, the world’s largest digital currency exchange.

Binance Crypto exchange has $2.1 Billion of Ethereum (ETH) positions as of writing on May 24, while OKX and Bybit each have $1.1 Billion and $1 billion, respectively.

There are approximately $189 Million of Ethereum (ETH) open positions on dYdX, a decentralized exchange (DEX).

According to available data, traders still prefer custodial digital currency exchanges when trading Ethereum (ETH) derivatives. There are non-custodial options like dYdX that are gaining momentum.

Millions Worth Of Ethereum (ETH) Longs Liquidated

Coinalyze data likewise shows that only $18.7 Million of “long” Ethereum (ETH) positions have been liquidated by exchanges in the last 24 hours. 

In total, there were $22.4 Million in liquidations indicating that most traders were positive  tendency, expecting prices to edge higher in the days ahead.

Ethereum (ETH) prices are bearish, contracting in the past day and extending losses from late April when the coin soared to $2,100 regardless of positive on-chain data flow.

As of May 25, the total amount of Ethereum (ETH) staked, securing the proof-of-stake network, is at record highs of over $41 billion.

Feature Image From Canva, Chart From TradingView

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