Ethereum (ETH) open interest on CME climbs to March levels, signals volatility ahead

Ethereum (ETH) is also reevaluating its climb after losing the $3,500 support level. ETH is now watched for its ETF potential and the effect of prices on the DeFi ecosystem. Based on CME futures levels, ETH may be facing more volatility. 

CME futures open interest indicates how mainstream finance sees ETH. The current open interest is similar to the March levels, close to this year’s market peak. CME futures open interest continued to expand to $1.25B, suggesting that volatility may be ahead of the ETH market price. 

The Binance ETH/USD perpetual derivative pair also expanded its reported volume above $1B, growing in the past week. Total ETH open interest on all Binance pairs reached $4.7B for ETH. Negative funding rates only affected Bybit and Kraken. The recent price drop also led to a dominance of long positions and a long/short ratio growth. 

Read: ARK Invest Backs Out of Spot Ethereum ETF With 21Shares

Despite the recent price slide, liquidations have been relatively low. DeFi overall is threatened by $1.5B in liquidable value, of which $1.1B is concentrated on Maker DAO. The latest price slide targeted liquidation levels is down to $3,400, with smaller positions down to $3,300. On the upside, more than $330M in liquidable positions can be targeted above $3,600. Multiple liquidation bands can also add to the volatility in the coming days.

ETH may be facing a more volatile scenario than BTC, but it is on track to reverse some gains after the news of imminent ETF approvals. For now, ETH does not have the support of fund inflows and no reassurance of mainstream interest. Both common traders and whale wallets show bearish sentiment , turning even more bearish in the last 24 hours. 

The support level at $3,300 is also closely watched for possible ETH scenarios. In the past few days, the liquidations heatmap suggested ETH may reverse the trend and return to the $3,700 range. 

More optimistic predictions see the current slide as temporary, mostly due to speculative trading and attacks on short and long positions. The recent growth in leveraged positions and open interest was tied to the news of ETF approval, aiming to tap short-term volatility for quick gains.

If the Bitcoin ETF is to be taken as an example, Ethereum may soon also see spot buying. Optimistic predictions for the ETH funds envision inflows of $10-$15B, requiring some physical buying. Interest in ETH itself may spark coin holding, as the token becomes more valuable in its growing ecosystem. 

ETH flows to exchanges for cashing out

The big difference between current Bitcoin (BTC) activity and the inflow of more ETH on exchanges is the inflows are also consolidated, possibly belonging to whales. Reserves rose dramatically, with a 27% rise in exchange deposits in the past day.

Centralized exchanges now hold 305.35K ETH, the highest level in the past 120 days. The type of flow also hints at the potential for cashing out. In the past week, there were more flows to exchanges where a fiat exit was possible. The amount of ETH is small compared to the coins locked for staking or in DeFi, but cashing out may further depress the price. 

Also read: Ethereum ETFs Tank in Trade as $3B ETH Exits crypto exchanges

ETH also sees more than 15% of its trade against fiat USD. One reason for selling ETH is that it is a tool for cashing out of decentralized trading. Most of the fiat exchanges are also among the biggest markets for Southeast Asia, with the Probit exchange taking up 30% of the volume. The Probit exchange volume is about three times that of Binance and may not reflect the true conditions of the Ethereum market.

The ETH market price also depends on USDT inflows, which have supported the two most valuable assets. ETH is also the only coin supported by the ETF narrative, while older and well-known altcoins and tokens are still lagging in the latest bull market.

Cryptopolitan reporting by Hristina Vasileva