NOIDA (CoinChapter.com) — There has been an increase in Ethereum open interest recently as Ethereum, the second-largest cryptocurrency by market capitalization, has seen renewed optimism in 2024.
With its ongoing focus on scalability improvements and growing use cases in the DeFi and NFT spaces, ETH could be poised for a year of significant growth. However, can it reclaim its all-time high and potentially even set new records?
ETH Open Interest Could Be A Bullish Signal
CryptoQuant analysts shared a report highlighting Ethereum’s futures markets have seen a significant surge in open interest. An increase in the metric, which tracks the total number of outstanding futures contracts, signals growing confidence within the market.
The increase in open interest coincides with Ethereum’s upward price trajectory, suggesting strong momentum among traders who believe the cryptocurrency will continue to rise.
However, it’s important to remember that high open interest brings an element of volatility.
Notably, the chart reveals a significant surge in open interest, coinciding with Ethereum’s upward price trend, reaching its peak levels since July 2022. This surge indicates sustained confidence among futures traders in Ethereum’s current uptrend.
CryptoQuant analysts noted
As many outstanding contracts exist, sudden market shifts can lead to amplified price swings. While this favors a bullish scenario, realizing that potential corrections or pullbacks could be more pronounced is crucial. As such, traders should not take it for granted that a bull run would continue indefinitely.
ETH: Fundamental Strengths
Aside from Ethereum’s open interest, the blockchain project has fundamental strengths supporting a potential price surge. Ethereum developers are working to launch further scaling solutions to boost transaction capabilities and reduce fees, making it more attractive for developers and users.
The slew of applications for a spot ETF with exposure to ETF has also generated hype in favor of Ethereum and likely helped spike its open interest.
Additionally, Ethereum’s dominance in the DeFi and NFT arenas could fuel demand for ETH. After a TVL decline in the first three quarters of 2023, Ethereum TVL has been rising since Oct. 2023. Ethereum’s TVL (in USD) witnessed a sharp increase in Feb. 2024, likely due to the token’s price rally.
Despite the bullish case coming from Ethereum’s open interest, global economic downturns or a shift to risk-off sentiment in traditional markets could dampen bullish sentiments favoring ETH.
As such, while ETH has sufficient bullish cues, it is impossible to say with certainty that the token will chart a new ATH this year, though the possibility is high.
ETH Price Fails To Stay Above $3,000
Meanwhile, ETH price failed to hold above $3,000 despite multiple breakouts above the price level. ETH’s relative strength index returns to the neutral region after a dozen days of remaining overbought. However, the RSI remains at the threshold of overbought condition, scoring 70.34 on the daily charts.
RSI is a momentum indicator measuring asset price movements to identify overbought or oversold conditions.
Traders often consider an overbought RSI level a bearish signal since the occurrence usually precedes a bearish reversal or consolidation phase for the underlying token. As such, despite the increasing Ethereum open interest, ETH price reversed its rally, dropping 3% to a daily low near $2,900 on Feb. 23.
If the sell-off continues, Ether price could drop to the 20-day EMA (red wave) support near $2,740, attracting short traders to the market. Breaching the immediate support would confirm the downtrend, forcing ETH price to test its 50-day EMA ( purple wave) support near $2,530.
Conversely, a rally from here might see ETH price face resistance from the supply wall near $3,070. Moreover, flipping the immediate support could help the token rally to the resistance near $3.280 before retreating.
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