Daan Crypto notes a 21% drop in ETH open interest against a 9% price dip, indicating heavy leverage unwinding in the market.
Bitcoin’s $5.8B open interest decline with minimal price movement shows widespread position closures or profit-taking across crypto.
Daan emphasizes future upside now depends on spot demand, ETF inflows, and treasury activity rather than leveraged trades.
Ethereum has recorded a notable $6 billion drop in open interest since reaching local highs, marking a 21% decline. Despite this steep reduction, ETH has only seen a 9% pullback in price during the same period.
Market Reset Follows High Leverage Liquidations
According to on-chain analyst Daan Crypto Trades, the Ethereum market has undergone a needed reset. The significant drop in open interest suggests that excessive leverage has been effectively flushed out. He noted that many long positions became overly aggressive during the recent price rally, prompting a deeper correction.
https://twitter.com/DaanCrypto/status/1953093483473895819
Such corrections are often seen as healthy within broader bullish trends. A market with lower leverage is typically more stable, and price movements become less erratic. Traders exiting leveraged positions contribute to more balanced conditions moving forward.
This reset phase has helped cool down an overheated environment that developed as Ethereum approached its short-term highs. While the price correction has been milder than the open interest drop, the shakeout of positions provides a clearer path for organic price discovery.
Bitcoin Follows a Similar Path with Lower Price Movement
Bitcoin also saw a drop in open interest, falling by approximately $5.8 billion, representing a 13% decline. However, BTC’s price only pulled back by around 2%. This further suggests that many traders were either liquidated or took profits amid short-term uncertainty.
The discrepancy between the price decline and the drop in open interest implies that the market has been driven less by spot selling and more by leverage unwinding. These types of movements tend to clear the way for more sustainable growth if spot demand increases.
Such developments in both the Ethereum and Bitcoin markets reflect broader structural cleanup rather than a shift in the long-term trend.
Spot Market Now Key for Further Upside
Daan Crypto Trades emphasized the importance of spot market activity from this point forward. With much of the excessive leverage cleared, any future upward movement will depend heavily on spot demand.
He pointed out that ETF flows, spot premiums, and treasury buying will become critical indicators. Traders are now watching for signs of institutional accumulation and renewed buying pressure.
The overall sentiment indicates a healthier trading environment than seen in the past few weeks, albeit with no guarantees of immediate upside.
