Ethereum's Open Interest Plummets by 50% as $6.4 Billion in Positions Disappear: Accelerated Market Reset

Ethereum Open Interest Plummets

Summary:
Ethereum's price has dipped below $2,800, triggering panic among investors and raising concerns about a potential bear market. A recent report reveals that Ethereum's open interest on Binance has halved, reflecting a significant contraction of $6.4 billion in derivative positions. This drastic decline indicates a deeper structural reset in the Ethereum market as speculation unwinds across various exchanges.

Key Takeaways:

Ethereum’s open interest on Binance has fallen from a peak of $12.6 billion to $6.2 billion, a 51% decrease.
Major derivatives platforms show a similar downturn, indicating a widespread market shift.
Ethereum's price has seen a dramatic fall from $4,830 to approximately $2,800, highlighting the current bear trend.
A crucial breakdown in Ethereum's 3-day chart shows it is now below key moving averages for the first time since late 2024.

Market Reset: Ethereum's Open Interest Declines

Ethereum has recently dipped below the $2,800 threshold following a sudden and sharp fall, causing considerable anxiety within the market. This has led many investors to adopt a defensive stance, with some experts even suggesting that a broader bear market may be on the horizon. The selling pressure in both the spot and derivatives markets has intensified, contributing to increased volatility as traders find it challenging to identify a solid support level.

A noteworthy CryptoQuant report by Darkfost outlines a troubling trend: Ethereum's open interest on Binance has been steadily decreasing for over three months. After hitting an all-time high of $12.6 billion on August 22, it has now plunged to $6.2 billion, representing a significant 51% decline, or nearly $6.4 billion in evaporated derivative positions.

Although this decline seems drastic, it is essential to note that open interest has only recently fallen below the previous high of $7.7 billion. This suggests that the 2025 derivatives market had become overly speculative and reveals that Ethereum might be undergoing a more profound structural reset than previously anticipated.

Structural Changes in the Market as Speculation Unwinds

Darkfost emphasizes that 2025 marked a highly speculative phase in Ethereum's history, characterized by aggressive leverage and rapid inflows. The structural integrity of the market turned out to be less robust and sustainable than it appeared during the rally. The decline in Binance's open interest is just one facet of a larger pattern observed across major derivatives platforms, indicating a broader unwinding of speculation.

For instance, on Gate.io, Ethereum's open interest has decreased from $5.2 billion to $3.5 billion, while Bybit has experienced an even steeper decline, from $6.1 billion to $2.3 billion. This coordinated reduction demonstrates the extent to which speculative positions have been liquidated. Concurrently, Ethereum's price has dropped from $4,830 to $2,800—a staggering 43% decline from its peak.

Ethereum Open Interest by Exchange

This widespread decrease in leverage implies that the market is undergoing a more profound reset than ordinary corrections. Investors appear cautious about jumping back into positions, especially given that liquidations are accumulating across exchanges. While the diminished open interest may negatively impact short-term momentum and sentiment, Darkfost suggests that this aggressive deleveraging could ultimately lead to a more stable market foundation, conducive for establishing a sustainable bottom for Ethereum.

Bearish Trends in Ethereum's Price Structure

Ethereum's 3-day chart reveals a clear breakdown in its price structure. The asset is now solidly below the 50 SMA, 100 SMA, and 200 SMA for the first time since late 2024. The rejection from the $3,600–$3,800 range initiated a strong downturn, causing ETH to breach all major moving averages and confirming a transition to a longer-term downtrend. The trading price around $2,800 represents a crucial test of former support; however, current momentum remains weak.

ETH Testing Critical Liquidity Level

The 50 SMA has now dropped below the 100 SMA, with both averages converging downward towards the 200 SMA—a setup typically signaling prolonged corrections. Volume has increased on the declines, indicating that sellers dominate the market, and there is minimal evidence of aggressive buying at lower prices. The recent wick towards $2,700 reveals more vulnerability than strength, suggesting that buyers lack conviction in defending this critical level.

ETH is also forming a pattern of lower highs and lower lows, further reinforcing the bearish market structure. Should the $2,750 level break decisively, the next significant liquidity areas are near $2,550 and $2,300, corresponding to previous consolidation levels earlier in the market cycle.

Featured image from ChatGPT, chart from TradingView.com