Ethereum prices crashed unexpectedly on May 24.
The surprise collapse in Ethereum prices sent the coin below last week’s lows, toward the psychological level of $1,800. Following this dump, Coinalyze on-chain data reveals that there has been a sharp drop in open interest, suggesting that some traders were caught off guard and had to exit their positions.
Ethereum Open Interest Drop
On May 24, ETH’s open interest stood at $5.2 billion across all major cryptocurrency exchanges such as Binance and OKX. Of this, $4.7 billion was from perpetual futures, while less than $450 million was from futures.
In cryptocurrency 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 from leading platforms.
Being derivatives, open interest positions are often leveraged, meaning the trader borrows funds from the exchange to trade a larger lot size. In this way, merchants have to assign collateral, which is margins, to finance the operation. Depending on the lot size of the trade and the leverage used, there may be “margin calls”. In such a scenario, when the price of the underlying asset moves against the expected direction, the exchange may sell the collateral to protect itself if the trader does not increase his margin.
On May 24, ETH prices, in line with the general trend in crypto markets, fell by approximately 5%, from a high of $1,875 to a low of $1,775. This reversed the gains of the past two weeks, forcing the coin lower in sync with the losses of late April and early May 2023.
As a result of this correction, data from Coinalyze shows that open interest in Ethereum positions plunged 7.3%. There are now $5.2 billion in ETH derivatives positions, most of which are on Binance, the world’s largest cryptocurrency exchange.
Binance has $2.1 billion in ETH positions as of May 24, while OKX and Bybit each have $1.1 billion and $1 billion, respectively.
There is approximately $189 million in open ETH positions on dYdX, a decentralized exchange (DEX). According to available data, traders still prefer custodial cryptocurrency exchanges when trading ETH derivatives. There are non-custodial options, such as dYdX, that are gaining momentum.
Millions of ETH Longs Settled
Data from Coinalyze also shows that only $18.7 million of ETH “long” positions have been liquidated by exchanges in the last 24 hours. In total, there were $22.4 million in liquidations, indicating that most traders were bullish and expected prices to rise in the coming days.
Ethereum prices are bearish, contracting the day before and extending losses from late April when the coin soared to $2,100 despite positive on-chain data flow. As of May 25, the total amount of ETH staked, securing the proof-of-stake network, stands at record levels of over $41 billion.
According to CryptoPredictions, the ETH Price is forecasted for today (25.05.2023) to be in the $1,515.978 – $2,229.379 price range. Ethereum is predicted to end today at $1,783.503. Ethereum started in May 2023 at $1,885.392 and is predicted to finish the month at $1,488.748. During May, the maximum forecasted ETH price is $2,115.261 and the minimum price is $1,438.377.
Before making any financial decisions, though, it is always best to do your own research.
By Audy Castaneda