One quant explained how patterns currently forming in Ethereum Open Interest could suggest that altcoin season is coming “sooner than expected.”
Altcoin season could be just around the corner based on Ethereum patterns.
In a CryptoQuant Quicktake post, the analyst discussed why altcoin season could be just around the corner for the cryptocurrency sector based on trends occurring in several Ethereum and Bitcoin indicators.
The first measure of relevance here is “open interest,” which tracks the total volume of derivatives positions related to a particular asset that are currently open on all centralized exchanges.
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If the value of this indicator rises, it means that speculators are now opening new positions for the coin. On the other hand, a decline means that users are either voluntarily closing their positions or are being forced to liquidate by the platform.
Now here is a chart showing how the open interest trends between Bitcoin and Ethereum compare over the past year:
As shown in the graph above, Bitcoin open interest has been moving somewhat sideways recently, while indicators for Ethereum have recorded growth.
This suggests that ETH has recently been showing more interest in derivatives market contracts than the original cryptocurrency. One of the factors driving this could be the news cycle regarding the approval of cash exchange-traded funds (ETFs) for the asset.
In the same chart, the quant also attached data for another indicator, Expected Leverage Ratio (ELR). This indicator measures the ratio between open interest for all assets and foreign exchange reserves. The latter is, of course, the total amount of coins currently in wallets on all centralized exchanges.
ELR basically provides information about the amount of leverage currently being chosen by the average user in the derivatives market. If you look at the graph, you can see that this ratio has recently surged in Ethereum, but has been flat in Bitcoin.
Therefore, not only has ETH recently received more speculative interest than BTC, but these users opening contracts also use more leverage and therefore appear to be exposed to higher risk.
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The analyst believes that the fact that Ethereum has overtaken Bitcoin in these metrics could be a potential sign that altcoin season may be just around the corner.
“If Ethereum’s price continues to consolidate in its current range, it is very likely that altcoin season will begin sooner than expected,” the quant points out. Now, considering this changing trend, it remains to be seen how things will unfold in the market in the near future.
ETH price
Ethereum, which had previously shown a slowdown, has gotten back on track over the past few days, with its price rising back above the $3,900 level.
Dall-E, featured image from CryptoQuant.com, chart from TradingView.com
Source: NewsBTC.com