Bitrabo Editorial
Ethereum, the second-largest cryptocurrency by market cap, experienced an unexpected price crash on May 24th that took the coin below the previous week’s lows towards the $1,800 psychological level. The decline caught some traders unaware, leading to a sharp drop in open interest as they rushed to exit their positions.
Ethereum’s Open Interest Dropped Significantly
According to on-chain data from Coinalyze, Ethereum’s open interest on May 24th was $5.2 billion across all major cryptocurrency exchanges like Binance and OKX. Out of this amount, $4.7 billion came from perpetual futures, while less than $450 million was from futures contracts. Open interest represents the total number of open positions in cryptocurrency derivatives trading, including long and short positions, drawn from perpetual futures and futures of leading platforms.
Because these positions are often leveraged, traders can allocate collateral (margin) to fund the trade. However, depending on the lot size of the trade and the leverage used, there can be “margin calls.” These occur when the underlying asset’s price moves against the trader’s predicted direction, and the exchange may sell the collateral to protect itself if the trader doesn’t top up their margin.
Ethereum’s prices dropped about 5% on May 24th, reversing gains from the past two weeks and forcing the coin lower in sync with losses from late April and early May 2023. This correction resulted in a 7.3% decrease in the open interest in Ethereum positions, according to Coinalyze data.
Currently, there are $5.2 billion worth of ETH derivatives positions, most of which is in Binance, the largest cryptocurrency exchange globally. Binance has $2.1 billion of ETH positions as of May 24th, while OKX and Bybit each have $1.1 billion and $1 billion, respectively. There are about $189 million of ETH open positions on dYdX, a decentralized exchange (DEX).
Based on available data, traders still prefer custodial cryptocurrency exchanges when trading ETH derivatives, although there are non-custodial options like dYdX that are gaining momentum.
Millions Worth Of ETH Longs Were Liquidated
Coinalyze data shows that only $18.7 million of “long” ETH positions were liquidated by exchanges in the last 24 hours, out of a total of $22.4 million in liquidations, indicating that most traders were bullish and expecting prices to rise in the days ahead.
Ethereum prices are bearish at the moment, contracting in the past day and extending losses from late April despite positive on-chain data flow when the coin soared to $2,100.
As of May 25th, the total amount of ETH staked to secure the proof-of-stake network is at record highs of over $41 billion.
Feature Image From Canva, Chart From TradingView