The Ethereum (ETH) market may now be heading for a significant shift in momentum as its derivatives market continues to exhibit unprecedented growth.
Particularly, while Bitcoin’s price action remains a dominant force in the market, Ethereum’s derivatives activity suggests that it could be gearing up for notable upward momentum.
New Highs In ETH Open Interest And Leverage Ratios
According to a recent analysis by CryptoQuant’s EgyHash, the open interest in Ethereum has surpassed its previous all-time high, marking a 40% increase in just four months and exceeding the $13 billion threshold.
The surge in open interest, which represents the total number of outstanding derivative contracts, reflects a growing engagement among traders and institutions in Ethereum’s market.
Alongside this, EgyHash also mentioned that funding rates have turned moderately positive, signalling that long-position traders are currently dominant. This aligns with a sentiment favouring further price increases for ETH in the short term.
The rise in open interest is not the only indicator of Ethereum’s increasing activity in derivatives markets. The CryptoQuant analyst pointed to Ethereum’s estimated leverage ratio.
EgyHash disclosed that this metric which is calculated as the ratio of open interest to the exchange’s coin reserves, has also reached a new all-time high of +0.40.
Commenting on what these rising metrics means for market participants, the CryptoQuant analyst wrote:
While these trends underscore positive market sentiment toward ETH, it would be prudent to remain mindful of potential risks. The elevated leverage and dominance of long positions could increase the likelihood of a long squeeze if sudden price volatility occurs, potentially leading to market corrections.
Ethereum Market Performance
Regardless of the positive key metrics, Ethereum has continued to be one of the underperforming crypto in the market especially when compared to Bitcoin.
Particularly, while Bitcoin has consistently being breaching major resistance to hit new highs, ETH still remains 36.2% decrease away from its all-time high of $4,878 registered in 2021.
However, as of today, the asset seems to be gearing up for an uptrend. At the time of writing, Ethereum has surged by 0.9% in the past day with a current trading price of $3,112.
Renowned analyst known as Ali on X has recently shared his outlook on the asset noting that Ethereum could outperform Bitcoin soon. The analyst backed this statement citing several key metrics and trends.
According to Ali, the altseason indicator is flashing buying opportunity and ETH’s MVRV momentum nears a key moving average suggesting significant upside potential.
The analyst also mentioned the spot exchange-traded flows (ETF) Inflows and increasing whale Activity. Ali then suggested that Ethereum could test $4,000 and $6,000 levels based on an ascending parallel channel. He also highlighted a bullish theory on ETH’s potential to hit $10,000.
But there is another bullish theory!#Ethereum could be mirroring the price action of the S&P500, which puts a $10,000 target on $ETH.https://t.co/ifn1zGnn9x
— Ali (@ali_charts) November 19, 2024
Featured image created with DALL-E, Chart from TradingView
