Is Ethereum Poised to Hit $3,000 with Surging Open Interest?

Ethereum Open Interest reached a record peak

Ethereum Open Interest reached a record peak of $35.69 billion, signifying heightened speculative actions.
ETH price surpassed $2,700 for the first occasion since February, marking a 53% increase over the previous month.
U.S. spot Ethereum ETFs garnered $402 million in inflows during the last month.
$123 billion of ETH is positioned near the cost basis (0-20% profit range), posing a volatility risk.
Technical indicators hint at a potential “bull flag” formation with probable upward momentum towards $3,000-$3,500.

Ethereum has experienced a notable rebound in recent weeks, breaking above $2,700 for the first time since February after a tough first quarter. The second-largest cryptocurrency is currently trading around $2,670-$2,736, reflecting an impressive 53% rise over the last month.

This surge is occurring amidst a rise in trading activity. As per CoinGlass data, Ethereum Futures Open Interest has escalated to a record high of $35.69 billion, signaling aggressive positioning by traders who foresee continued gains.

This steep increase in Open Interest throughout May has exceeded ETH’s price trajectory, implying an uptick in leverage within the system. While such bullish sentiment can promote rapid advances, it also heightens Ethereum’s susceptibility to potential volatility.

Institutional enthusiasm seems to be a significant factor driving Ethereum’s recent success. U.S. spot Ethereum exchange-traded funds have drawn $402 million in inflows over the last month.

BlackRock’s iShares ETH Trust alone attracted $53 million within a mere 24 hours, elevating its cumulative inflows to $4.3 billion. This illustrates increasing institutional confidence in the cryptocurrency.

Numerous substantial ETH acquisitions by institutions further underscore this trend. Abraxas Capital purchased over 350,000 Ethereum valued at roughly $837 million between May 7 and May 21.

The firm also withdrew 185,000 ETH from exchanges during a 44% price increase in early May, indicating long-term belief in the asset.

Market Structure Creates Volatility Risk

Despite the favorable momentum, a troubling market structure has emerged. According to Glassnode data, around $123 billion of ETH’s market capitalization is concentrated in the 0-20% profit range.

The majority of this ETH was obtained between $2,300 and $2,500. This suggests that even a slight pullback could thrust a considerable number of holders into unrealized losses.

The chart illustrates a growth of this group in May, notwithstanding the broader upswing. Consequently, Ethereum’s ascent has left a substantial amount of capital on a precarious ledge, making the market vulnerable to quick sentiment shifts if the price momentum falters.

On the daily chart, ETH is exhibiting bullish momentum as it tests the upper Bollinger Band. The price remains above the crucial $2,573 20-day simple moving average, which has acted as vital support for the rally.

ETH is forming a rising wedge pattern, which might suggest continuation if it surpasses the $2,800 resistance. The 50-day and 100-day EMAs, along with most other significant moving averages, are indicating buy signals.

Technical Indicators Point To Possible Breakout

Technical analysts from CryptoQuant have pinpointed a potential “bull flag” pattern within Ethereum’s price movement. This chart configuration is often interpreted by traders as a sign of ongoing upward momentum following a consolidation phase.

Ethereum’s price has fluctuated within a set range between $2,400 and $2,700 for nearly three weeks, establishing favorable conditions for such a breakout.

Ethereum has sustained its status above the 200-day Exponential Moving Average (EMA), a technical signal that has historically preceded notable price surges when consistently respected. Given this positioning, some analysts propose a prospective upward shift towards a price range between $3,000 and $3,500 could occur.

The Relative Strength Index (RSI) currently stands at 68.93-71.5, nearing overbought territory. This indicates possible fatigue in upward momentum and implies a brief pause or retracement may be on the horizon, especially as the market nears the psychological levels of $2,800 and $3,000.

Simultaneously, the MACD line continues to stay above the signal line, affirming bullish sentiment, though the histogram is flattening, which could signal dwindling momentum.

Several industry leaders are now calling for the U.S. Securities and Exchange Commission to authorize staking for Ethereum ETFs. SEC Commissioner Hester Peirce recently clarified that Ethereum’s proof-of-stake mechanisms are not categorized as securities.

Should ETF staking requests from entities like 21Shares gain approval, this could potentially enhance inflows into the asset.

If ETH fails to maintain above $2,700, it may revisit support at $2,650 or the 20-day SMA at $2,573. Conversely, a breakout above $2,800 could push the price towards $2,900 and beyond if the momentum persists.

As of this writing, Ethereum is trading at approximately $2,670, having slightly retracted from its recent high above $2,700.