Ethereum OI Suffers Its Biggest Cleanup Since Early 2024 – Details

Ethereum has fallen below the $4,000 level for the first time since early August, marking a significant shift in market sentiment. After weeks of strong performance, ETH has now lost nearly 20% of its value since September 13, leaving many traders concerned about the next move. The broader market correction has fueled uncertainty, but some analysts argue this is a necessary reset that could prepare the ground for renewed growth.

Top analyst Darkfost highlights that Ethereum’s Open Interest is experiencing one of its biggest resets. He notes that after an extended period of bullish momentum, excess leverage has been punished, leading to a sharp contraction in positions. This decline is especially visible on Binance, where much of the recent ETH trading activity has taken place.

While the drop in price and sentiment appears negative, analysts see potential positives in this reset. Lower Open Interest often reduces the risk of cascading liquidations and allows the market to stabilize. For Ethereum, this moment may serve as a critical test of its ability to hold strong levels of support and set the stage for its next move once bullish momentum returns.

Ethereum’s Open Interest Reset Marks a Turning Point

Darkfost explains that the recent shift in Ethereum’s Open Interest is not only significant but also one of the sharpest resets observed since the start of 2024. Historically, such resets follow periods where excessive leverage pushes Open Interest to unsustainable levels, as was the case for ETH in recent weeks. The cryptocurrency had been attracting a large share of market attention, fueled by ETF enthusiasm and strong accumulation patterns, which left it vulnerable to sharp liquidations.

Once liquidations accumulate and Open Interest falls, the immediate selling pressure often begins to ease. This tends to create conditions where the market can stabilize and, in some cases, prepare for recovery. The dynamic can be seen as a “cleansing” effect, flushing out overextended traders and restoring balance to the market structure.

In detail, Binance recorded the steepest monthly average decline, with more than $3 billion in Open Interest wiped out on September 23rd, followed by another $1 billion yesterday. Bybit also faced a reduction of $1.2 billion, while OKX dropped around $580 million. These figures underscore the scale of the reset across major derivatives platforms.

This contraction reflects a broader market reset, unwinding an environment that had become dangerously over-leveraged. For Ethereum, it may mark the beginning of a healthier phase, where reduced speculative pressure allows organic demand and fundamentals to play a stronger role in shaping the next trend.

Price Action Insights: Testing Critical Levels

Ethereum (ETH) is trading near $3,939, marking a sharp decline of over 5% in the latest session and extending its correction since the early September peak above $4,700. This drop has brought ETH below the key $4,000 psychological level for the first time since August, signaling rising selling pressure.

The chart shows ETH breaking down after forming a double top pattern around the $4,700–$4,800 range, a classic bearish signal that suggested exhaustion of upward momentum. The rejection from this zone has now pushed ETH closer to its 50-day moving average (blue), which previously acted as strong support during the rally. A decisive close below this line could open the door to a deeper retrace toward the 200-day moving average (red), now positioned near $3,100–$3,200.

Despite the current weakness, ETH remains in a broader uptrend when viewed from the July low near $2,200. That rebound established a strong bullish structure, and as long as ETH holds above the $3,500–$3,600 region, the long-term outlook remains constructive. For now, bulls must reclaim $4,200 to regain momentum, while failure to hold current levels may accelerate selling pressure and test deeper supports in the coming sessions.

Featured image from Dall-E, chart from TradingView