Altcoins
Altcoin season coming soon? Quant Says This Ethereum Pattern Could Suggest So — TradingView News
A quant explained how a trend currently forming in Ethereum Open Interest could imply that altcoin season is coming “earlier than expected.”
Altcoin season could soon be approaching based on the Ethereum model
In a CryptoQuant Quicktake article, an analyst explained why an altcoin season could soon be coming for the cryptocurrency sector, based on a trend occurring in a few Ethereum and Bitcoin indicators.
The first relevant metric here is “open interest,” which tracks the total amount of derivatives positions related to a given asset currently open on all centralized exchanges.
When the value of this metric increases, it means that speculators are currently opening new positions for the coin. On the other hand, a decline implies that users close their positions of their own accord or are forcibly liquidated by their platform.
Now here is a chart that shows how the Open Interest trend has compared between Bitcoin and Ethereum over the past year:
NewsBTC
As the chart above shows, Bitcoin Open Interest has recently been moving more or less sideways, while at the same time the metric has seen growth for Ethereum.
This suggests that ETH has recently seen more appetite for derivatives market contracts than for the original cryptocurrency. One driving factor behind this could be the news cycle related to the approval of spot-for-the-asset exchange-traded funds (ETFs).
In the same chart, the quant also attached data from another indicator: the estimated leverage ratio (ELR). This metric measures the ratio of open interest to foreign exchange reserve for any asset. The latter naturally corresponds to the total amount of the coin that is currently in the wallets of all centralized exchanges.
The ELR essentially provides us with information on the amount of leverage that the average derivatives market user currently opts for. From the chart, it is visible that this ratio has recently seen an increase for Ethereum, but has shown stable action for Bitcoin.
So, it would appear that not only has ETH recently attracted more speculative interest than BTC, but those users who open contracts also face higher risks as they take on more leverage.
The analyst believes that the fact that Ethereum has surpassed Bitcoin in these indicators could be a potential sign that an altcoin season could soon be approaching.
“If Ethereum price continues to consolidate in the current range, it is very possible that the altcoin season will start sooner than expected,” notes the quant. It now remains to be seen how things will develop in the market in the near future, given this change in trend.
ETH Price
After seeing a slowdown earlier, Ethereum has returned to track in recent days, with its price now back above the $3,900 level.