Ethereum Open Interest Drops $310 Million Despite Bitcoin Rally: Is ETH Price at Risk?

Ethereum Price Forecast:

Ethereum price opened trading above the $2,600 level on Oct 17, for the third consecutive day. However, while BTC continues to show strength backed by strong institutional demand, ETH derivative markets trends flashed early signals of bull fatigue on Thursday.  Can ETH price hold the $2,500 support?

Bulls Succumb to 4% Pullback after $2,600 Retest

On October 15, Ethereum price rose to a new monthly high of $2,628, amid a sector-wide rally propelled by dovish macroeconomic indicators posted by China’s Ministry of Finance (MoF) and the US Bureau of Labor Statistics.

However, while Bitcoin (BTC) price advanced further to an 80-day peak of $68,323 on Wednesday, ETH price has stagnated, raising concerns of early buyer-fatigue.

Corroborating this narrative, the ETHUSD daily chart below shows ETH price has been on a steep downtrend in the last 48-hours.

As seen above, Ethereum price tumbled as low as $2,575 on Thursday, Oct 17, reflecting a 4.18% decline from the weekly timeframe peak recorded on Tuesday.

While ETH price continues to consolidate around the $2,590 level at the time of publication, other vital underlying market data trends suggest the bullish momentum might be weakening.

Failure to close above $2,600 could potentially heighten risks of a larger correction phase as the week draws to a close.

Ethereum Open Interest Has Declined $310M in 2-Days

Looking beyond the 4% price decline, trends observed in the Ethereum secondary derivatives markets shows traders have considerably scaled down on their ETH positions over the last 2-days. This may have contributed to the weakening bullish momentum.

The Open Interest (OI) chart below culled from Coinglass, represent the total value of active LONG and SHORT futures contracts currently listed for a particular cryptocurrency.

OI is a vital trading indicator as it provide clear insights into real-time swings in traders’ short-term sentiment.

Looking at the chart above, Ethereum Open Interest had risen to $13.08 billion when prices peaked at $2,628 on Tuesday Oct 15. But since then, ETH traders began to close out their positions, rather than double-down on the rally.

Conspicuously, ETH open interest is now down to $12.77 billion at the time of writing on Oct 17, reflecting capital outflows worth more than $310 million within the last 48-hours.

Ethereum Price at Risk of More Short-Term Correction

When open interest begins to decline as key resistance levels are tested, strategic investors often interpret this as a short-term bearish signal for two key reasons.

• Low Confidence: Firstly, a decline in open interest while prices are near resistance levels often suggests that traders are losing confidence in the upward momentum. Instead of anticipating a breakout, many are opting to take profits or cut their losses, thereby reducing their exposure.

This behavior indicates that the buying pressure is weakening, which can prevent further upward price movement.

• Bulls Deploying Risk-Averse Strategy: Secondly, falling open interest can reflect the unwinding of leveraged positions. As traders exit these positions, it typically signals a shift towards risk aversion, indicating that they expect increased volatility or potential downside in the near term.

In Ethereum’s case, the $2,628 price point appears to be a formidable resistance level, and without sustained bullish momentum or fresh capital inflows, the likelihood of a retracement increases.

Consequently, unless new buyers step in to support the $2,600 breakout attempt, Ethereum could be vulnerable to a short-term pullback towards lower support levels, potentially closer to the $2,500 range.

Ethereum Price Forecast: $2,570 Breakdown Could Intensify Downward Pressure

Ethereum appears poised for more downside if it fails to hold the current support at $2,570. The price has already retraced 4.18% from its recent $2,628 high, showing clear signs of waning bullish momentum.

The RSI currently hovers around 58.46, suggesting Ethereum has some room to fall further before reaching oversold conditions, which increases the probability of a deeper correction.

A breach below $2,570 would likely activate stop losses, driving further downside pressure. If this occurs, Ethereum could retest the $2,493 pivot support from early October, where strong buying interest previously emerged.

Should selling pressure persist, the next significant support would be at $2,259, corresponding to the S1 level on the pivot chart. This level could act as a decisive point for bulls to defend.

On the resistance side, if Ethereum can rally back above $2,600 and close above this level with sustained volume, the bulls might attempt to push the price towards the $2,836 R1 resistance.

However, given the current market conditions and open interest decline, such a scenario would require a notable increase in buying activity, which seems unlikely without fresh catalysts.