As the ETH 2.0 merge draws closer, data indicates that Ethereum’s open interest has risen to an almost all-time high.
Ethereum Open Interest has sharply risen in recent years
According to the Arcane Research weekly report, the ETH open interests in futures or perps have risen up to 4.2 Million ETH over the past few days.
The “open interest” is an indicator that measures the total amount of Ethereum futures and perps contracts currently open in the market (denominated in ETH). It includes shorts as well as longs.
This indicator indicates that there are a lot of open contracts in the market when its value is high. These values are usually associated with higher volatility in crypto’s price.
Low values for the metric indicate that many market contracts have already been closed. The coin may experience less volatility as a result.
Below is a chart that illustrates the change in Ethereum futures over the past 12 months.
The metric's value seems to be increasing in recent weeks. Source: Arcane Research's The Weekly update - Week 31, 2022| Source: Arcane Research's The Weekly Update - Week 31, 2022
You can see that the Ethereum open rate has been in an upward trend for the last week, and it is nearing its highest value ever.
This value, which is just below 4.21 Million ATH on July 14, 2018, marks the second highest recorded indicator.
While the massive hedging amid arbitrage opportunities like Celsius’ bankruptcy was behind the last peak, the report notes that the current rise is likely caused by trading strategies ahead of the 2.0 merge.
Massive discounts can also be seen in the ETH futures market at the moment. Normally, high open interest combined with a negative basis such as right now can lend themselves to the possibility of short squeezes (a situation where liquidations are triggered together by a sudden price swing).
But Arcane Research points out that the latest increase in leverage is likely from more conservative risk management, which would mean that any possible short squeeze that might take place currently won’t be too significant.
ETH price
At the time of writing, Ethereum’s price floats around $1.7k, down 1% in the past week. In the last month, crypto gained 40%.
Below is a chart showing the trends in coin price over the last five days.
It seems like crypto's value has fallen in the past two days. Source: TradingView ETHUSD| Source: ETHUSD on TradingView
Featured image by Kanchanara at Unsplash.com. Charts and charts are from TradingView.com. Arcane Research