Data shows the Ethereum derivatives-related metrics have shot up recently, an indication that the value is prone to going through a volatile storm.

Ethereum Open Interest & Leverage Ratio Have Each Spiked Recently

In a CryptoQuant Quicktake post, an analyst has discussed in regards to the trend within the derivatives indicators of Ethereum. The metrics in query are the Open Interest and the Estimated Leverage Ratio.

First, the Open Interest keeps track of the overall amount of ETH-related contracts which can be currently open on all derivatives platforms. The metric naturally takes under consideration for each long and short positions.

When the worth of this metric rises, it means the investors are opening up fresh positions available on the market. Such a trend suggests derivatives trading interest within the coin goes up.

However, the indicator registering a drawdown implies positions out there are happening. This could possibly be due to investors willfully closing them up, or resulting from exchanges forcibly liquidating them.

Now, here’s a chart that shows the trend within the Ethereum Open Interest over the previous few years:

The worth of the metric appears to have been doping up in recent days | Source: CryptoQuant

The above graph shows that the Ethereum Open Interest has witnessed rapid growth recently. It has surpassed the previous all-time high (ATH) to set a recent record above $13 billion.

When considering the timeframe of the past 4 months, the indicator has increased by over 40%, which suggests an explosion in speculative interest across the cryptocurrency has occurred.

This development, nonetheless, will not be the healthiest, because the trend within the second indicator of relevance, the Estimated Leverage Ratio, would suggest. This metric measures the ratio between the Open Interest and the Derivatives Exchange Reserve.

The Derivatives Exchange Reserve is of course just the overall amount of the cryptocurrency sitting in wallets related to all centralized derivatives exchanges.

The Estimated Leverage Ratio tells us the quantity of leverage or loan that the typical derivatives user within the Ethereum market is currently choosing.

Below is a chart for this indicator.

Looks just like the value of the metric has been heading up over the previous few weeks | Source: CryptoQuant

From the graph, it’s apparent that the Ethereum Estimated Leverage Ratio has shot up recently. This may mean that the rise within the Open Interest has been more rapid than the rise within the Derivatives Exchange Reserve.

The investors at the moment are sitting on all-time high (ATH) leverage, which is usually a bad sign for ETH because it implies any volatility in the long run could take down the overleveraged positions and induce a mass liquidation event called a squeeze.

The quant has identified that the Ethereum Funding Rate, a ratio between long and short positions, is positive immediately, which suggests that if a squeeze is to occur shortly, it’s more more likely to involve the bullish side of the market.

ETH Price

On the time of writing, Ethereum is floating around $3,000, down almost 7% over the past week.

The worth of the coin seems to have been consolidating sideways recently | Source: ETHUSDT on TradingView

Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com