Ethereum News Today: Ethereum open interest drops 21% amid crypto leverage reset and profit-taking

Ethereum (ETH) has experienced a 21% decline in open interest amid a broader leverage reset in the derivatives market, according to on-chain analyst Daan Crypto Trades. This drop, totaling approximately $6 billion, contrasts with a relatively modest 9% price correction, indicating that the market has undergone a period of aggressive unwinding of leveraged positions. The imbalance between open interest and price movement suggests that traders are actively reducing speculative exposure, particularly after a recent rally that had driven leverage to elevated levels [1].

The analyst highlighted that such corrections are often a necessary part of broader bullish cycles. As excessive leverage is flushed out, the market becomes more stable and less prone to abrupt swings. This reset appears to have stemmed from traders closing long positions that had become overextended during ETH's recent upward move. While the pullback in open interest has been substantial, the relatively contained price correction implies that the market is now in a phase of repositioning rather than a fundamental breakdown [1].

Similar trends have emerged in the Bitcoin market, where open interest has also declined by around $5.8 billion, or 13%, despite a mere 2% drop in price. This further supports the interpretation that position closures and profit-taking have played a significant role in the observed market behavior. The divergence between price and open interest data suggests that the market is being shaped more by leverage adjustments than by direct spot selling. If spot demand increases, these conditions could lay the groundwork for more sustainable growth [1].

Looking ahead, Daan Crypto Trades emphasized that the path forward for ETH now depends largely on spot demand. The removal of excessive leverage means that future price appreciation will need to be driven by organic buying pressure, rather than speculative bets. Key indicators will include ETF inflows, spot premiums, and institutional treasury activity. Traders are closely watching for signs that long-term holders are accumulating ETH at lower levels, which could signal renewed confidence in the asset’s value proposition [1].

The leverage reset has also served to stabilize a previously overheated market environment, providing clearer conditions for price discovery. While the immediate outlook remains uncertain, the current market structure is arguably healthier than it has been in recent weeks. The broader crypto market, including altcoins such as Mantle’s MNT, appears to be navigating a similar period of consolidation, suggesting a structural shift rather than a reversal of long-term bullish momentum [2].

Sources:

[1] https://coinmarketcap.com/community/articles/68936f15013d8370a0de86ce/

[2] https://www.mitrade.com/insights/news/live-news/article-3-1013214-20250805