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Ethereum is experiencing one of the most crucial resets in over a year, triggered by its value falling beneath $4,000. This retest has been predominantly evident in futures open interest, where billions of dollars in positions have been eliminated across major exchanges. This swift unwinding emerges as a corrective maneuver following weeks of excessive leverage during price surges that had elevated derivatives activity to unsustainable heights.
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Massive Open Interest Elimination Across Major Exchanges
The latest correction in Ethereum’s price was a broader market reset instead of merely a decline, with leveraged traders shouldering most of the losses. Statistics illustrate that Ethereum’s open interest faced a sharp decline over the recently concluded week across various crypto exchanges. According to data from the on-chain analytics platform CryptoQuant, billions worth of Ethereum positions were erased last week, with Binance leading the drop with the steepest monthly average fall.
Ethereum’s plunge beneath the $4,000 threshold marked the tipping point for over-leveraged traders. The movement prompted a flurry of liquidations throughout derivatives markets, intensifying selling pressure.
Statistics indicate that more than $3 billion was obliterated on September 23 alone through Binance, followed by over $1 billion just a day later. Bybit also saw a reduction of $1.2 billion in positions, while OKX reported a $580 million drop. The significant decrease is apparent in collective open interest, which has plummeted to its lowest point since early 2024.
The chart data reveals that futures leverage and open interest were closely connected to the price surge in July and August, and concurrently, it fell in unison with the price.
Ethereum Open Interest by exchange
Spot Ethereum ETF Outflows Contribute To Market Pressure
Ethereum’s fall beneath $4,000 and the downturn in open interest coincided with a week of significant outflows from spot Ethereum ETFs in the United States. According to data from Farside Investors, $795.56 million exited over five trading days last week, marking the largest weekly exodus since the products were launched.
The sell-off escalated toward the end of the week, with Thursday marking $251.2 million in outflows, followed by another $248.4 million on Friday. Diminishing institutional participation significantly added to the selling pressure, as investors exercised caution amid uncertainty regarding whether regulators will permit staking features in these ETFs. This coordinated exit from both derivatives and institutional products has heightened volatility, creating a convergence of pressure throughout Ethereum’s trading ecosystem.
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After dropping as low as $3,845, ETH bulls have succeeded in maintaining above $3,800. At the moment of writing, Ethereum is trading at $4,002. Despite this effort to regain stability, the leading altcoin is still down by about 10% on a weekly basis, considering it was trading around $4,490 at this time last week. The optimistic scenario now rests on whether ETH can reclaim and hold a position above $4,000.
Featured image from Unsplash, chart from TradingView
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