Ethereum Price Crash Looms as Futures Open Interest Hits All-Time High — Will History Repeat Itself?

According to Cointelegraph: Ethereum's futures open interest hit an all-time high on Oct. 16, raising concerns among traders that the cryptocurrency may be on the brink of a price crash. Ether (ETH) experienced an 8.8% gain between Oct. 14 and 15, but failed to break through the $2,650 resistance level. This rise in open interest closely resembles a similar peak in August 2024, which preceded a significant price correction of 31.7%. Now, traders are asking: will history repeat itself?Higher Demand for ETH Futures Isn’t Always BearishAlthough higher open interest suggests growing demand for ETH futures, it doesn’t necessarily signal a bearish outlook. The key takeaway is whether market-wide leverage is increasing or decreasing. Greater leverage means larger potential for abrupt price movements due to forced liquidations.In futures markets, sudden liquidation events can lead to cascading liquidations, causing even larger price swings. The risk of these events increases as more traders open leveraged positions. Traders monitor open interest to assess the likelihood of sharp price shifts driven by these liquidations.Past Open Interest Peaks and ETH Price CorrectionsPrevious instances of open interest peaks have often led to price corrections for Ether. On Aug. 2, 2024, open interest hit a peak of 4.75 million ETH, and within four days, ETH’s price plunged by 31.7%. Similarly, in April 2024, open interest reached 4 million ETH, and the price dropped by 24% over 12 days.These historical patterns suggest that open interest peaks can precede sharp downward corrections in Ether’s price. The current surge in open interest — up 12% in four weeks — could follow a similar trajectory, raising the possibility of another significant drop.Bitcoin and Market Trends Will Influence ETH's PriceWhile high open interest levels have often led to price corrections for Ether, the broader cryptocurrency market will also play a crucial role in determining ETH’s trajectory. If Bitcoin breaks through its $70,000 resistance level, the demand for leveraged ETH positions could fuel further bullish momentum, possibly driving Ether’s price higher.However, if the cryptocurrency market remains neutral or undergoes a correction, Ether could see a 20% to 25% drop, bringing its price down to around $1,960.Ether’s current open interest peak is a potential warning sign for traders, given the historical precedence of price corrections following such spikes. While a 20-25% price drop to $1,960 is possible, much will depend on the broader market and Bitcoin's price movements. Traders should stay alert to both leverage metrics and market conditions to anticipate the next move for Ether.