Ethereum price enters low-risk phase as open interest drops 50% since August

Ethereum price appears to be calming down as pressure eases after months of leverage exiting the market, with still no clear direction.

Ethereum is trading in a more benign market environment after significant leverage reduction, with open interest on major exchanges declining since August, data shows.

According to a Dec. 21 post on X by analytics firm Alpharectal, Ethereum’s total open interest is currently at about 50% of its summer peak. Open interest refers to the total amount of active futures and perpetual contracts.

As it goes up, leverage increases. When it falls, traders close out their positions and the risk in the system decreases.

Currently, Binance holds the largest share of ETH open interest at around $7.6 billion, followed by Gate.io and HTX. This change indicates that excessive leverage is no longer weighing down the market, and there is often less potential for sharp price movements caused by liquidations.

Lower open interest typically limits short-term volatility, but can also create conditions for larger price movements later on. In past cycles, similar resets have occurred before another bar drop or a more stable recovery phase.

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Selling pressure weakens as leverage is removed

Further data supports the idea that downside pressure is easing. A December 22 analysis by CryptoQuant contributor CryptoOnchain shows that Ethereum taker sales volume on Binance has fallen to its lowest level since May. Taker sales volume tracks the amount of ETH sold at the market price, which reflects active sales.

With the 30-day average falling to around $6.3 billion, fewer traders appear to be rushing out of their positions. This indicates that sellers are not controlling price movements like they did during the recent selloff, but it does not mean that buyers have taken over.

This type of setup often results in stable prices rather than immediate price increases. For a stronger upside scenario, buyers need to come back with more trading volume and open interest growth.

Ethereum price technical analysis

The daily chart shows that the Ethereum price is in a clear downward trend, characterized by lower highs and lower lows. After the steep drop, prices have leveled off, hovering between roughly $2,800 and $3,300. This range appears to act as a decision zone.

Ethereum daily chart. Credit: TradingView

Short-term moving averages continue to fall and remain above price, continuing pressure for a rebound. Attempts to push this back have so far failed.

The Bollinger Bands expanded during the decline, but are now contracting. This often happens when volatility fades and the market pauses before its next move.

Volume data matches this figure. There was heavy selling during the breakdown, but recent trading has seen light and mixed volume. Sellers are less active, but buyers are not stepping in with conviction.

Momentum indicators paint a similar picture. After recovering from oversold levels, the relative strength index is now just below 50. This does not confirm a change in trend, but a short-term rebound is possible.

While the long-term moving average is still significantly negative, the MACD and short-term momentum indicators are slightly more positive.

The bullish trend will improve if the daily closing price is above the moving average around $3,300-$3,500 and the volume is high and the RSI is above 50. On the downside, a clean break below the $2,800-$3,000 support zone could open the way for another drop.

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