AMBCrypto - 9/8/2023 1:31:27 AM - GMT (+0 )
- Open Interest around ETH surged to its highest since the Shanghai Upgrade, indicating a liquidity increase.
- The USDC/ETH liquidity pool could push ETH in the upward direction.
The way Uniswap [UNI] Liquidity Providers (LPs) were utilizing their capital showed that they were optimistic about the price action of Ethereum [ETH], Glassnode revealed. To evaluate this sentiment, Glassnode considered the capital deployment to the upside and downside.
Read Ethereum’s [ETH] Price Prediction 2023-2024
Distributing liquidity around ETH
The on-chain data provider, in its 6 September post on X (formerly Twitter), noted that 8.6% of the liquidity tilted towards the upside, while -2.7% preferred the downtrend. Glassnode also looked at a second-tier liquidity pool, which was even much more bullish than the first.
The highest concentration of liquidity in the #Uniswap Pool (approx 30.4% of capital) is located within an 11% price range, with expected downside of -2.7% and upside of +8.6%.
A second tier of liquidity is positioned with a -8.5% buffer to the downside, and a +23.7% buffer to… pic.twitter.com/QGx3JaWgEa
— glassnode (@glassnode) September 6, 2023
Previously, AMBCrypto had reported that ETH could face capitulation at some point. However, the current condition of this sect suggested otherwise, and some on-chain metrics could prove this sentiment, including the ETH futures and options volume.
According to Glassnode, ETH’s futures and options volume was $8.3 billion on 4 September. An asset’s volume and open interest both describe the liquidity and activity of options and futures contracts.
So, when the metric increases, it means a rise in interest in an asset, while it can also serve as a measure of strength. Conversely, the opposite happens when the futures and options volume decreases.
But Glassnode noted that the aforementioned value was the highest ETH had experienced since the Shanghai Upgrade. Therefore, the average derivative volume is a sign of a strong belief in the ETH price action on the positive side. With respect to the Open Interest, Glassnode noted that:
LPs keep the reserves in a high state
“Given there has been no significant shift in trade volumes for either market in August, it suggests that traders are continuing to move liquidity higher up the risk curve.”
Another metric that supports a bullish sentiment by Uniswap LPs is the ETH options put vs call volume. After decreasing for a while after the BlackRock triumph, the options vs. call volume rose since the Grayscale partial win. This means that the LPs were rotating capital into ETH contracts.
On looking at the liquidity concentration and distribution, on-chain data showed that there was short-term volatility. This volatility has served as a key motivator of Uniswap’s liquidity pool distribution. Hence, it was necessary to check out the USDC/ETH Uniswap pool.
Realistic or not, here’s UNI’s market cap in ETH terms
From the chart below, upside volatility is expected to increase by 22.14%, with ETH’s value around $1,624. If Uniswap LPs maintain the reserves with a high concentration of liquidity, then ETH might have no other option than to push above $1,700.
However, if concentration cools off, then ETH may continue to consolidate. But at press time, an upside was likely to be the case than a downtrend.