Ethereum (ETH) $16 Billion Open Interest hints at $4K Price Rebound

Ethereum’s price rebounded above $3,700 on Sunday, June 9, after tumbling to a 2-week low during the crypto market crash on Friday. Derivatives market trends suggest bulls have not thrown in the towel.

Ethereum Price Rebounds from 2-Week Low

The global crypto market was thrown into turmoil on Friday, June 7, 2024, following the release of a hawkish US Non-Farm jobs report published by the US Bureau of Labor Statistics.

However, amid the market downturn, Ethereum investors appeared to show significantly more resilience compared to the broader crypto industry average.

Ethereum Bulls Maintain $16 Billion Future Contracts

Investors appear to be keeping up a bullish outlook on Ethereum price action as they await the inflow of funds in the newly approved ETFs, expected to be listed for official trading in the weeks ahead.

While the rest of the crypto market battles the aftershocks of the wild price volatility, amid hawkish macroeconomic landscape, market data shows that existing ETH investors remain reluctant to close down their positions.

Coinglass’ Open Interest chart below, tracks daily changes in total value of funds invested in ETH futures contracts. This essentially provides insights into the changes in speculative traders’ behaviour with respect to the current spot price trends.

According to the chart above, ETH open interest declined from $16.97 billion on June 6 to hit $16.35 billion at the time of writing on June 9, reflecting a $620 million decline.

This shows that, while ETH price had dipped 7.38% from its weekly-top on June 6, open interest only shrank by 3.65%, nearly half of the price dip.

When open interest drops slower than price during a market dip, it could be interpreted as bullish recovery signal for two major reasons.

Investor Confidence: A smaller decline in open interest compared to the Ethereum price dip suggests that a significant number of LONG contract holders opted to maintain and defend their positions during the market crash on Friday.

This indicates widespread confidence in the asset’s potential for recovery, as investors are not rapidly closing out their contracts.

Potential for Short Squeezes: Secondly, if ETH price starts to 2.5% rebound over the weekend continues to extend further in the week ahead, many active bearish positions could be forced to make rapid purchases to cover their SHORT contracts. This scenario can lead to a short squeeze, accelerating the upward price movement.

In summary, the disparity between the rate of decline in Ethereum price and open interest can be seen as a positive sign, suggesting underlying strength and potential for a bullish rebound in the near term.

ETH Price Forecast: $4k Target Still in Play

After the market crash on Friday, ETH speculative traders held on their $16 billion futures contracts, leading Ethereum price into an instantly 2.5% rebound 2.5% to reclaim the $3,700 territory on June 9.

But, as the ETH ETF listing nears, Ethereum could witness additional buying pressure as strategic traders look to ape-in before the major inflows begin.

However, technical indicators show that ETH now faces an uphill task breaking above the 20-day SMA price level at $3,775. If ETH can close consecutive trading days above that critical $3,775 resistance level, bulls could set their sights firmly on the $4,000 target in the week ahead.

But if another pull-back ensues, ETH bulls will have to defend the $3,687 support level to avoid major short-term losses and rapid liquidations.