Ethereum Surpasses $3,600 as Open Interest Hits ATH: Is Altcoin Season on Horizon?

Key Notes

Ethereum has rallied 15% in a week, crossing $3,600, its highest level in five months.Ether futures open interest hit a record $22 billion, reflecting increased market activity.A 4.68% daily surge has sparked optimism for a potential altcoin rally.

Ethereum ETH $3 619 24h volatility: 6.2% Market cap: $436.49 B Vol. 24h: $48.27 B has surged by 15% over the past week, marking a milestone as it flirts with the $3,600 level for the first time in five months. Currently trading around $3,590, the cryptocurrency’s impressive 4.68% gain in the last 24 hours has reignited investor hopes for an upcoming altcoin rally.

This upward momentum aligns with a record-high Ether futures open interest, which touched $22 billion on November 27, a 23% rise over the last month. Interestingly, the last time Ether futures open interest hit such levels was when ETH traded above $4,000 in May, with open interest then at $14 billion.

Despite the optimism, analysts caution against reading too much into the elevated leverage. While heightened open interest suggests growing activity, it doesn’t necessarily indicate bullish sentiment, as derivatives markets balance both long and short positions.

Risks from Leveraged Trading

A notable concern within this leveraged environment is the vulnerability of retail traders, often referred to as “degens”, who are known to utilize leverage ratios as high as 20x. Even a modest 5% daily price decline can trigger mass liquidations, wiping out margin deposits. Between November 23 and November 26, $163 million in long ETH futures positions were liquidated, highlighting the risks of overleveraged positions.

Perpetual contracts, which closely mirror the spot price of ETH, offer insights into retail futures activity. The funding rate for ETH perpetuals currently hovers near a neutral 2.1% per month, with only a brief spike above 4% earlier this week. This neutrality suggests that despite Ethereum’s significant price increase, retail demand for leveraged longs remains subdued.

Meanwhile, Ether’s monthly performance has been equally notable, with a 37% gain pushing its market capitalization to $431 billion, up 35% during the same period.

Institutional Interest in Ethereum ETFs Grows

Adding to Ethereum’s positive momentum is the performance of Ether-based exchange-traded funds (ETFs). On Wednesday alone, Ether ETFs recorded $90.10 million in inflows, bringing cumulative net inflows to $240 million since their launch in late July. This growing institutional participation marks a stark contrast to the lukewarm start of Ether ETFs, signaling increasing confidence in the cryptocurrency’s long-term prospects.

The question now is whether Ethereum’s surge could trigger a broader altcoin rally. Historically, altcoin seasons have followed Bitcoin bull markets, driven by declining Bitcoin dominance and Ether’s strong performance. It is important to note that in the past few days, major altcoins, including XRP and Solana (SOL) have recorded a two-digit rally.

However, according to CryptoQuant CEO Ki Young Ju, the true onset of an altcoin season would require a major influx of capital from retail traders, a factor that remains uncertain.

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