Ethereum’s Futures Open Interest hit a 3-month low, what does this mean for the market?

Ethereum (ETH) futures open interest (OI) have nosedived to three month low on the Bitfinex cryptocurrency exchange. Coming after the recent massive futures market sell-off, the plunge in OI could spell some trouble for the Ethereum market.

Is Ethereum futures getting liquidated?

According to data from the dashboard of leading crypto market intelligence firm, Glassnode, open interest in Ethereum (ETH) futures has hit a three-month low of $1,605,850,992.22 on the crypto spot and derivatives exchange, Bitfinex. The figure has broken the previous low of around $1.61 billion reached on January 10.

The plunge in OI on the exchange is coming after the Ethereum futures market saw significant futures liquidation. Late last month, the Ether futures market saw over $12 million worth of futures liquidations on a single day following a sharp price drop.

Open interest is a measure of market activity in the derivatives market. It is the total number of outstanding derivatives contracts that have not been settled. While the metric does not forecast price action, it is used to reflect the general investors’ sentiment for an asset. The fact that Ether futures OI has been falling in the market sets off alarm bells for investors. This is because decreasing OI points to money flowing out of the market.

Ether futures still look promising to many market analysts

Last year, Ethereum futures open interest had an interesting run. As the price of Ether rallied to an all-time high of $4,860 on November 20, so did open interest too. Data from Skew shows that the aggregated open interest for ETH futures reached $12.6 billion globally on the day, surpassing the previous high of $11.1 billion recorded on Sept. 6, 2021.

Currently, analysts have noted that the market is showing mixed emotions for Ether derivatives including futures and options contracts. While the futures market has been indicating “slight discontent”, the options market seems to have turned neutral from being bearish. Additionally, while Bitfinex has seen decreasing open interest in Ether futures, other derivatives exchanges like Binance, FTX, and Huobi have equally been seeing sustained levels of Ether futures OI. Today, the total Ether futures OI is around $8.68 billion.

However, Analysts in the traditional market as well are considering Ether futures to still be promising. According to global investment bank JP Morgan, investors seem to be shifting out of Bitcoin futures into Ether futures. Similarly, India may soon see the launch of its first regulated Ether futures ETF according to recent reports.