Ethereum OI Hits $7.7 Billion, Why A Rally Might Be In The Works
Ethereum open interest (OI) had seen a meteoric rise in the weeks leading up to the Ethereum Merge. Even after the Merge, the open interest has not declined, given all of the new interest from institutional investors following the network’s move to a proof of work mechanism. This time around, the Ethereum open interest has hit another important high point, which points to a possible rally in the price of ETH.
Open Interest Reaches $7.7 Billion
Ethereum open interest still remains high despite ETH’s decline to the low $1,000s back in September. Data shows that the open interest in ETH has reached $7.7 billion this week despite traders often choosing to avoid trades at quarterly closes, even in the crypto market.
This means that there is now $7.7 billion in futures open interest, but the majority of these have actually skewed towards the bearish side. Not surprisingly, given that the crypto market is barely a year into its bear market, investors expect more decline to follow.
ETH steadies above $1,300 | Source: ETHUSD on TradingView.com
Investor sentiment also took a hit since mid-September when the long-awaited Merge upgrade failed to trigger a rally in the price of ETH. The subsequent decline had seen investors begin profit-taking to prevent more losses while watching the market closely. The same is now being seen across the futures markets.
Will Ethereum (ETH) Rally?
A large amount of open interest tends to carry some positive implications for the digital asset. The reason is that so many traders are choosing increasingly bearish positions on Ethereum as of this time, meaning that there is a potential for a short squeeze if the price were to break out from here.
Now, there is not much expected for the crypto market in the way of recovery, given declines across various spheres. But if the Fed were to heed the advice and stop increasing interest rates even in the short term, then the macro markets would likely rally, which would take the crypto market with it.
The next FOMC meeting is expected to happen at the beginning of November, which is less than a month away. There are predictions of more interest rate increases at this time, which would be negative for crypto-assets such as Ethereum.
Presently, bulls are focused on getting the price back up enough to test the $1,500 resistance once more. However, with sell pressure still mounting, ETH is not expected to hit this price anytime soon.
Featured image from Crypto News Flash, chart from TradingView.com
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