A quantitative analyst has found an Open Interest trend in Ethereum that would point to an approaching altcoin season.
Driven by patterns seen in both Ethereum and Bitcoin indicators, the analyst discussed in a recent CryptoQuant Quicktake post the possibility for an imminent altcoin season. Tracking the total number of open derivatives positions for a given asset across all centralized exchanges, the important statistic of interest is the “Open Interest.”
Rising Open Interest implies that speculators are actively creating new positions; a drop signals either forced liquidation or voluntary termination of positions by users. Over the past year, a recent graphic demonstrates divergent patterns in the Open Interest for Bitcoin and Ethereum: While Ethereum’s Open Interest has grown, Bitcoin’s has been somewhat static.
“Ethereum Surges, Altcoin Potential?”
This rise in ETH Open Interest points to an increasing demand for ETH derivatives market contracts, maybe driven by news on the asset’s approval of spot exchange-traded funds (ETFs).
The same graphic also shows information on the Estimated Leverage Ratio (ELR), which gauges the ratio between Open Interest and the Exchange Reserve, therefore indicating the overall asset value kept in centralized exchange purses. The ELR shows the degree of leverage customers in the derivatives market are using. For ETH, this ratio has lately increased whereas for Bitcoin it remains constant.
This pattern suggests not only more speculative interest in Ethereum than in Bitcoin but also that traders are using more leverage and hence running more risks.
The analyst speculates that ETH performance in these metrics might indicate the start of an altcoins season. “If Ethereum’s price continues to consolidate in the current range, it’s quite possible that the altcoin season will start sooner than expected,” the quant observed Whether this trend keeps on will depend much on the near-term behavior of the market.
Ethereum has recovered momentum after a brief slow down; its price has surged back beyond the $3,900 barrier in recent days.
