Ethereum [ETH] price takes off, but are short sellers in trouble?

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Oct 3

Ethereum's price surged in the last 24 hours.
Short sellers faced losses due to liquidations, while Ethereum's Open Interest reached a one-month high.

Ethereum[ETH]'s price displayed a remarkable surge within the last 24 hours. During this period, the price of ETH surged by 2.83%. Zooming out to a one-week timeframe, the price exhibited an even more significant uptick of 10.095%.

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Liquidations on the rise

While the price surge was undoubtedly welcomed by long-term holders, it posed a significant challenge for short sellers. The sudden and robust price increase led to the liquidation of a substantial number of short positions.

On 2 October, data from Velo showed a sharp uptick in liquidations linked to ETH. More than $9.42 million worth of short positions faced liquidation, with a substantial portion, approximately $8.05 million, originating from OKX. Binance also contributed significantly to this pressure, accounting for approximately $1.192 million.

Source: Velo

The liquidation of short positions can temporarily drive up the price of ETH. As short positions are forcefully closed due to rising prices, traders are compelled to buy back ETH. This increased demand can cause the price to surge even further.

Interestingly, despite the losses incurred by some traders due to liquidations, the Open Interest (OI) in ETH continued to rise. According to recent data from Glassnode, Open Interest in Perpetual Futures Contracts reached a one-month high of $52,756,272.22 on Bitmex.

High IV

Implied volatility reflects the market's expectations regarding future price movements. During this period, the implied volatility for ETH experienced a slight decrease. A drop in implied volatility often signals reduced market uncertainty or expectations of smaller price fluctuations.

Source: The Block

Following the price surge in ETH, the put-to-call ratio for the cryptocurrency declined from 0.36 to 0.34. This ratio measures the number of put options (bearish bets) relative to call options (bullish bets). A decline in this ratio suggested a shift in market sentiment toward greater bullishness.

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Additionally, the 25 delta skew for ETH also saw a decrease. The delta skew measures the difference in implied volatility between options with different strike prices. A decrease in the 25 delta skew can indicate a reduced demand for options that offer protection against significant price swings.