Ethereumย (ETH) prices unexpectedly crashed on May 24, sending the coin below last weekโs bottomย Line towards the $1,800 psychological level.ย
Asย aย resultย ofย 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.
Ethereumโs Open Interest Dropping
On May 24, ETHโsย open interest stood at $5.2 Billion across all major digitalย currency exchanges like Binanceย Cryptoย exchange and OKX. Out of this, $4.7 Billion were from perpetual futures, while less than $450 Million from futures.
In digitalย 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 aย greater lot size. In this way, traders have to allocate collateral, which is margin, toย finance the trade.ย
Depending on the lot size of the trade and the leverage used, there can be โmargin callsโ. Here, when the underlying assetโs price moves against their predicated direction, the exchange can sell the collateral toย guard itself if the trader doesnโt top up their margin.
On May 24, Ethereumย (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.ย
Followingย this correction, Coinalyze data shows that the open interest in Ethereumย (ETH) positions crashed by 7.3%. Thereย is now $5.2 Billion worth of Ethereumย (ETH) derivatives positions, most of which is in Binanceย Cryptoย exchange, the worldโs largest digitalย currency exchange. Binanceย Cryptoย exchange has $2.1 Billion of Ethereumย (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 Ethereumย (ETH) open positions on dYdX, a decentralized exchange (DEX). Accordingย to available data, traders still prefer custodial digitalย currency exchanges when trading Ethereumย (ETH) derivatives. There are non-custodial options like dYdX that are gaining momentum. Coinalyze data likewise shows thatย onlyย $18.7 Million of โlongโ Ethereumย (ETH) positions have been liquidated by exchanges in the last 24 hours.ย In total, there were $22.4 Million in liquidations indicating that most traders were positiveย tendency, expecting prices to edge higher in the days ahead. Ethereumย (ETH) prices are bearish, contracting in the past day and extending losses from late April when the coin soared to $2,100 regardlessย of positive on-chain data flow. As of May 25, the total amount of Ethereumย (ETH) staked, securing the proof-of-stake network, is atย recordย highs of over $41 billion. Feature Image From Canva, Chart From TradingViewMillions Worth Of Ethereumย (ETH) Longs Liquidated
