Ether (ETH) gained 8.8% between Oct. 14 and 15, but the $2,650 resistance level proved more challenging than anticipated. Traders have become increasingly concerned that Ether’s aggregate futures open interest reaching an all-time high on Oct. 16 could be a warning flag.
This surge in demand for leveraged ETH positions typically precedes severe price corrections. The aggregate Ether futures addressable market surpassed 5 million ETH for the first time ever on Oct. 15, representing a 12% increase from four weeks prior.
Ether futures open interest since 2020, ETH. Source: CoinGlass
On Aug. 2, the last time Ether’s aggregate open interest peaked, ETH’s price crashed 31.7% in less than four days, falling from $3,205 to $2,186. Will history repeat itself this time?
Higher demand for ETH futures is not necessarily bearish
Higher demand for ETH futures is not necessarily bearish, so the key insight from this data is whether system-wide leverage is expanding or contracting. The larger the bets, the greater the potential for sudden price movements due to forced liquidations.
Although derivatives markets may appear to be zero-sum games, their impact on spot prices is significant. This is primarily because futures contracts tend to trade at much higher volumes due to leverage. Additionally, whales and market makers rely on derivatives to quickly hedge exposures, a process that would be nearly impossible in spot markets due to lower available liquidity.
When forced liquidations of $50 million or more occur in futures markets, arbitrage desks immediately reduce risk on spot markets. This action further accelerates the price movement — whether upward or downward — creating an effect known as “cascading liquidations.” This is precisely why traders monitor open interest to detect the risk of excessive leverage leading to unexpected price swings.
On Aug. 2, open interest peaked at 4.75 million ETH, marking a 15% increase compared to four weeks earlier. Essentially, the current market situation closely mirrors the structure from August. A total of $279 million in leveraged long positions were forcefully liquidated —…
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