Ethereum (ETH) is making news as its open interest soars to a remarkable $16 billion, indicating a possible price recovery to $4,000. The $16 billion open interest in Ethereum today has been described as a bold indication of increased activity and investor interest. There are multiple reasons linked to the current increase in open interest.

There has been a lot of enthusiasm about Ethereum’s continuous updates, especially the switch from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism known as Ethereum 2.0. This update aims to improve the Ethereum network’s scalability, security, and energy efficiency while resolving some of its persistent problems.

The relative strength index (RSI), which indicates that Ethereum is currently in an oversold area, is a key indication of this bullish perspective. Because oversold assets are viewed as cheap and ready for a price correction, this situation usually occurs before a price comeback.

Increase in Ethereum Valuation Linked Increase in DeFi Activities 

The increase in DeFi activity has improved investor sentiment and Ethereum’s valuation. Non-fungible tokens (NFTs) have also significantly influenced Ethereum’s recent dynamics. During the market crash, Ethereum’s price dropped by 7.38%, falling slightly by two weeks to $3,598.

This will be the first time Etherum will be trading below $3,600 since the spot Ethereum ETF was approved. Analysis showed that Ethereum’s price was performing better than other larger cryptocurrency markets. 

The total Ethereum market dropped by 7.38%. In comparison, the total altcoin market suffered significant losses, measuring 9.25%, losing more than $3 billion in total market capitalization amid the June 7 market crash. This is a sign that the price of Ethereum is back in its former upward trend after a 2.5% rebound during the weekends, which saw it move back to $3,700 on June 9.

Institutional Investors Show Interest In Ethereum, List Obstacles 

Over the past years, institutional investors have expressed growing interest in Ethereum. Businesses specializing in Ethereum investments, such as Grayscale and Fidelity, have opened up additional channels for institutional money to enter the cryptocurrency market.

The encouraging signs are that risks and uncertainties could still impact Ethereum’s price trajectory. Regulation changes remain a major source of concern, especially in large markets such as the United States and Europe. 

High gas costs and network congestion have also been ongoing problems for Ethereum. Although the Ethereum 2.0 update is intended to address these issues, the transition is currently occurring, and any delays or technical difficulties might undermine investor confidence.

In a price performance chart published on the FX Empire platform on June 6, Ethereum’s open interest dropped from the top $16.97 billion to $16.35 billion on June 9, a  $620 million drop. This explains that while the price of Ethereum dropped by 7.37 from its highest weekly performance on June 6, its open interest had dropped by 3.65% (almost half the price).

Ethereum Rebounds By 2.5%, Breaks At 20-day SMA 

From experts’ perspectives, it is perceived as a bullish trend when open interest drops lower than the original price amid any drop in market performance. Prior to the bear run on Friday, Ethereum traders had to reach for their futures contracts, which are currently worth  $16 billion.

This development led the price of Ethereum to immediately rebound by 2.5% to reach the $3,700 price mark on June 9. Analysis has shown that Ethereum may start witnessing extra purchasing pressure as the official launching of Ethereum ETF draws near. 

Ethereum is currently showing a sign of additional purchasing pressure, as traders have started considering the aping-in before it starts its main inflow activities. Available technical indicators imply that Ethereum is currently showing an upward trend by breaking slightly above the 20-day Simple Moving Average (SMA) price mark, which is currently at the $3,775.

It is anticipated that the bulls may have to focus on the $4,000 in the future should the price of Ethereum close at $3,775. Should that happen, the bull must defend the previous $3,687 price support level to prevent major temporary loss that may lead to fast liquidation.