Ethereum Price Drops, But 'Leverage' Rises...Futures Open Interest at $5.5 Billion

▲ Ethereum (ETH)

Amid a more than 12% drop in Ethereum (ETH) over the past 10 days, an analysis suggests that leverage exposure is increasing again in the Binance futures market. While the price has attempted to recover near $2,400 before continuing its bearish trend, the derivatives market simultaneously showed signs of increased speculative positions and a return of liquidity.

On May 21 (local time), Bitcoinist reported, citing an analysis by Arab Chain, that Ethereum's open interest on Binance increased to approximately $5.5 billion. This level surpasses the 30-day average of about $5.34 billion. The current Z-score, which indicates how much open interest deviates from its recent average, has risen to about 0.62.

Arab Chain noted that open interest increased while Ethereum's price stabilized around $2,110. Generally, during a price decline, market participants tend to reduce exposure, and both leverage and open interest decrease. However, the current data shows that participation in the derivatives market is expanding again despite the bearish price trend.

Ethereum derivatives activity has gradually increased since March. Market liquidity slowly returned as price recovery progressed after the February lows, and the current open interest, exceeding the 30-day average, is presented as an extension of a trend accumulated over several months rather than a sudden surge. Bitcoinist stated that a Z-score of 0.62 is not a high range indicative of excessive speculation or crowded positions.

The analysis viewed this structure as a bidirectional conditional signal. The trend of increasing open interest while the price holds above $2,000 could signify the formation of new positions and directional bets. If this movement aligns with actual spot market capital inflows, derivatives demand and spot demand could reinforce each other, leading to more sustained price movements.

Conversely, if leverage increases without being supported by spot demand, the market structure becomes vulnerable. In this case, derivatives positions can amplify the next price movement, but the foundation to sustain that movement weakens. Arab Chain believes that the current Z-score is not yet at a level indicating vulnerability, and the future direction depends on whether the spot demand anticipated by the derivatives market actually materializes.

In terms of technical trends, Ethereum's short-term structure has weakened after losing momentum near $2,400. Bitcoinist reported that Ethereum is trading around $2,110, placing it in a key support zone that has been defended by buyers multiple times since late March. Lower highs have followed since the short-term peak in May, and the price has fallen below its short-term moving averages. The 200-day moving average continues its downward trend near $2,500, reinforcing a broader bearish structure.

The decrease in trading volume during the recent pullback was presented as a difference from the sharp decline in February. Bitcoinist explained that the current decline is closer to distribution and cautious risk reduction rather than aggressive selling. The key observation range is $2,080-$2,100. If this range holds, Ethereum could attempt to recover to $2,300 after stabilization, but if the support definitively breaks, further downside potential opens up to around $1,900, where strong buying interest emerged after the February sell-off lows.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*