Breaks Through $2,900 and Leaves Bitcoin Behind

-->Ethereum recently achieved a major milestone by breaking the $2,900 mark for the first time since early May 2022. This impressive rise sets Ethereum apart from Bitcoin, which has shown more moderate and sideways price movement over the same period. This is notable as Ethereum appears to be following its own path and is showing strong performance, with more than 16% gains for investors over the past week, compared to Bitcoin’s 8%.

Increasing open interest in ETH futures

However, Ethereum’s positive market performance comes amid rising open interest in ETH futures. Open interest, a measure that tracks the total number of open futures contracts across all centralized exchanges, has seen a sharp increase. A rise in open interest suggests investors are entering new positions in the futures market, which could increase overall leverage and volatility for Ethereum. Conversely, a decline would indicate that positions are being closed, either voluntarily or through liquidation, leading to more stable prices.

Recent analysis, including insights from a CryptoQuant post, shows that open interest in Ethereum has reached peaks not seen in nearly two years, indicating strong confidence among futures traders in Ethereum’s upward trend.

Possible increased volatility for Ethereum

While this trend shows confidence in Ethereum’s price, there is also a point of caution. The rapid rise in open interest, along with Ethereum’s recent price jump, could lead to increased market volatility. This is because high levels of open interest futures market can trigger squeezes, where mass liquidations amplify price movements, causing significant short- to medium-term price declines.

Given the current high open interest in Ethereum, the possibility of a futures squeeze is a risk that investors and traders should consider. Such events can have a major effect on the price of the cryptocurrency. In summary, while Ethereum’s break above $2,900 demonstrates its strong market position and decoupling from Bitcoin, rising open interest brings with it the potential for increased volatility.