While the dollar value of Ethereum’s open interest fell by about 11% between October 4 and 14, the fact that its size in ETH was at the same level at the end of the period as at the beginning calls into question the view that risk in the futures market has declined.
According to Santiment data, the Ethereum price also fell by about 11% over the same ten-day period. As a result, the drop in the dollar value of open interest, which shows the total size of futures contracts that have not yet been closed, can give the impression that investors have reduced their positions. Measured in ETH, however, the picture is different.
Dollar value fell, while the amount of ETH returned to the same level
Open interest was measured at 6.23 million ETH on both October 4 and October 14. In the intervening days, it ranged from 5.97 million to 6.47 million ETH. So rather than a market that remained inactive throughout the period, positions fluctuated but returned to their initial size.
The point Santiment highlights is that when the price falls, the dollar value of the same amount of ETH in positions also declines. Looking only at the dollar chart can lead to this loss in value being mistaken for positions being closed. In this case, the decline in dollar terms is not accompanied by a contraction in ETH-denominated open interest between the beginning and end of the period.
Ethereum surpassed Bitcoin in liquidations
In the 24 hours following the U.S. inflation data, however, Ethereum positions saw about $283 million in liquidations, according to CoinGlass data. The figure for Bitcoin was about $196 million. ETH therefore surpassed Bitcoin in forced position closures during this period.
Outflows also stood out on the ETF front. According to Farside data, Ether ETFs recorded net outflows on every trading day between October 1 and 12; on October 14, they also saw net outflows of about $130 million.
Against this backdrop, Santiment emphasizes that both the dollar value of open interest and its amount in coin terms should be monitored to assess whether positions in the futures market have actually shrunk.
Not investment advice.