Over the past week, Ethereum [ETH] has faced challenges in keeping pace with Bitcoin [BTC] and other leading alternative cryptocurrencies, as its price has dropped by 6% to reach $3,123 at the current time. The inability of Ethereum to break free from downward trends can be attributed to insufficient demand to counteract selling pressure. Reports suggest that sellers are currently in control, preventing a breakthrough above resistance levels.
On the other hand, the derivatives market tells a different story. There is a surge in speculative trading activity surrounding ETH, with derivative traders positioning themselves for potential future price fluctuations.
Surge in ETH Reserves on Derivative Exchanges
According to data from CryptoQuant, interest in Ethereum among speculative traders is on the rise. The reserves of ETH on derivative exchanges have reached 11.28 million, the highest level in more than a year. This increase in reserves suggests that traders are engaging in leveraged trading activities linked to Ethereum, indicating their bets on the coin’s future price movements.
Moreover, the derivative exchange supply ratio currently stands at 0.09, indicating that 9% of Ethereum’s total circulating supply is held on derivative exchanges. This ratio, the highest since April, highlights the growing influence of derivative trading on Ethereum’s short-term price trends.
The escalation in leveraged trading could lead to price fluctuations, particularly due to forced liquidations following unexpected price shifts in ETH. Additionally, these activities could reinforce either the bullish or bearish trends based on the positioning of market participants.
Record High Open Interest for Ethereum
Coinglass data indicate that Ethereum’s open interest has reached an all-time peak of $18.31 billion, signaling a surge in newly established positions related to ETH. Within this month alone, the open interest in ETH has grown by over $4 billion.
An increase in open interest combined with positive funding rates suggests a higher number of traders opening long positions compared to short positions, indicating a bullish sentiment regarding future price movements. However, findings from Market Prophit reveal a prevailing bearish market sentiment around Ethereum, which could dampen demand further and impede a bullish recovery.