Ethereum open interest drops by $4 billion as traders retreat

Ethereum's (CRYPTO:ETH) open interest (OI) on Binance has seen a sharp decline, reflecting growing bearish sentiment among traders.

After reaching an all-time high of $7.78 billion in December 2024, the OI has dropped nearly 50%, now standing at $3.1 billion.

This significant reduction highlights a cooling derivatives market and increased caution among investors.

The decline coincides with Ethereum's recent price struggles.

After briefly rebounding to $1,600 earlier this week, ETH faced resistance and fell to $1,450.

Persistent weak performance this year has eroded investor confidence, triggering heightened selling pressure.

Darkfost, an on-chain expert from CryptoQuant, noted that Ethereum's OI on Binance is now below its 365-day Simple Moving Average (SMA), signaling reduced speculative activity.

"The drop in open interest reflects a pullback in leveraged trading as investors await clearer market signals," he explained.

This trend aligns with broader declines in cryptocurrency futures markets.

Recent data shows Ethereum’s OI fell by 23.8% over the past month, while Bitcoin saw an 11.1% drop.

Analysts attribute this to heightened market volatility and regulatory uncertainties, which have dampened risk appetite among traders.

The impact of declining open interest extends beyond Ethereum’s derivatives market.

Liquidations have surged across crypto markets, with total liquidations exceeding $949 million in the past 24 hours alone.

This includes $734 million in long positions, further underscoring bearish sentiment.

Despite the downturn, some market experts remain optimistic about Ethereum's long-term potential.

Crypto analyst Milkybull Crypto suggested that ETH could be nearing a macro bottom around $1,585 and predicted a possible rally toward $10,000 if this level holds.

However, Darkfost cautioned that Ethereum’s price remains far from stability.

He urged traders to monitor investor behavior on Binance closely, given its influence on global trading volumes.

At the time of reporting, the Ethereum (ETH) price was $1,612.37.