Looking at the chart above, Ethereum Open Interest had risen to $13.08 billion when prices peaked at $2,628 on Tuesday Oct 15. But since then, ETH traders began to close out their positions, rather than double-down on the rally.
Conspicuously, ETH open interest is now down to $12.77 billion at the time of writing on Oct 17, reflecting capital outflows worth more than $310 million within the last 48-hours.
Ethereum Price at Risk of More Short-Term Correction
When open interest begins to decline as key resistance levels are tested, strategic investors often interpret this as a short-term bearish signal for two key reasons.
- Low Confidence: Firstly, a decline in open interest while prices are near resistance levels often suggests that traders are losing confidence in the upward momentum. Instead of anticipating a breakout, many are opting to take profits or cut their losses, thereby reducing their exposure.
This behavior indicates that the buying pressure is weakening, which can prevent further upward price movement.
- Bulls Deploying Risk-Averse Strategy: Secondly, falling open interest can reflect the unwinding of leveraged positions. As traders exit these positions, it typically signals a shift towards risk aversion, indicating that they expect increased volatility or potential downside in the near term.
In Ethereum’s case, the $2,628 price point appears to be a formidable resistance level, and without sustained bullish momentum or fresh capital inflows, the likelihood of a retracement increases.
Consequently, unless new buyers step in to support the $2,600 breakout attempt, Ethereum could be vulnerable to a short-term pullback towards lower support levels, potentially closer to the $2,500 range.
Ethereum Price Forecast: $2,570 Breakdown Could Intensify Downward Pressure
Ethereum appears poised for more downside if it fails to hold the current support at $2,570. The price has already retraced 4.18% from its recent $2,628 high, showing clear signs of waning bullish momentum.
The RSI currently hovers around 58.46, suggesting Ethereum has some room to fall further before reaching oversold conditions, which increases the probability of a deeper correction.