Ethereum (ETH) unexpectedly crashed on May 24, dropping the coin below last week’s lows towards the $1,800 psychological level. After this drop, on-chain data from Coinanalyze showed a sharp decrease in open interest, suggesting that some traders were caught unaware and had to exit their positions.
On May 24, ETH’s open interest stood at $5.2 billion across all major cryptocurrency exchanges like Binance and OKX. Out of this, $4.7 billion were from perpetual futures, while less than $450 million from futures. In cryptocurrency derivatives trading, open interest is the total number of open positions and can be long or short drawn from perpetual futures and futures of leading platforms. Being derivatives, open interest positions are often leveraged, meaning the trader borrows funds from the exchange to trade a larger lot size. Depending on the lot size of the trade and the leverage used, there can be “margin calls.” Here, when the underlying asset’s price moves against the trader’s prediction, the exchange can sell the collateral to protect itself if the trader doesn’t top up their margin.
On May 24, ETH prices fell roughly 5%, dropping from highs of $1,875 to as low as $1,775. As a result of this correction, Coinalyze data shows that the open interest in Ethereum positions dropped by 7.3%. There is now $5.2 billion worth of ETH derivatives positions, most of which is in Binance, the world’s largest cryptocurrency exchange. Binance has $2.1 billion of ETH positions, while OKX and Bybit each have $1.1 billion and $1 billion, respectively. There are roughly $189 million of ETH open positions on dYdX, a decentralized exchange (DEX).
Available data shows that traders still prefer custodial cryptocurrency exchanges when trading ETH derivatives, but some non-custodial options like dYdX are gaining momentum.
Coinalyze data also shows that only $18.7 million of “long” ETH positions have been liquidated by exchanges in the last 24 hours. In total, there were $22.4 million in liquidations, indicating that most traders were bullish, expecting prices to rise in the days ahead.
Ethereum prices are bearish, contracting in the past day and extending losses from late April when the coin soared to $2,100 despite positive on-chain data flow. As of May 25, the total amount of ETH staked, securing the proof-of-stake network, is at record highs of over $41 billion.