Ethereum broke above $2,900, but be wary of futures overheating
Ethereum has broken through the $2,900 level over the past day, but data suggests that the futures market may be starting to overheat. While Bitcoin has recently slipped to a sideways trend as a whole, Ethereum seems to have decided to choose its own path, as the industry's second-largest asset has surged nearly 4% in the past 24 hours.
In its latest rally, Ethereum hit the $2,900 mark for the first time since it began in May 2022. The chart below shows how the Token has performed over the past few days.
With this rally, Ethereum investors will enjoy more than 16% profits over the past week. Over the same period, Bitcoin's combined return was only around 8%. While ETH's depeg may be a sign of optimism for the asset, a pattern seems to be emerging, which could prove to be a worrying sign.
As one analyst explained in a CryptoQuant Quicktake post, ETH Holdings volume has experienced a strong spike recently. "Close Position" is a metric that tracks the total amount of Bitcoin futures contracts currently close position on all centralized Derivatives exchanges.
When the value of this indicator rises, it means that investors are now opening new positions in the futures market. In general, with the advent of more Long positions, the total leverage of the sector will rise, so this trend may lead to greater Fluctuation Crypto Assets.
On the other hand, the decline in this indicator means that ETH futures contract holders either voluntarily close position or are liquidated by the platform. After this decline, the price of the asset may behave more steadily.
As can be seen in Figure 1, Ethereum Holdings volume has recently risen to a high level and reached its highest peak in nearly two years.
"This surge shows that futures traders have continued confidence in Ethereum's current uptrend," the quantitative analyst noted. "However, given the impulsive nature of the recent rally, traders should exercise caution and consider the possibility of a sudden liquidation event, which could trigger a significant drop in prices in the short to medium term. ”
As mentioned earlier, when this indicator rises, the asset is more likely to show fluctuation. The root cause of this Fluctuation may be a large-scale liquidation event known as a "squeeze", which can trigger a sharp cascading effect in the futures market, amplifying the price Fluctuation that triggered the event.
Since the Ethereum Close Position contracts are very high at the moment, there is certainly a possibility of a futures crunch in the Crypto Assets.
(Source: Keshav Verma)
