ETH bulls rally: Grayscale’s legal win boosts open interest and sentiment

• ETH breaks out of limbo thanks to Grayscale’s win against the SEC.
• ETH derivatives demand registers spike along with shorts liquidations.

ETH bulls have finally made a statement after more than a week of uncertainty in terms of market direction. The newfound bullish momentum was courtesy of a favorable judicial decision involving ETFs.

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The Ethereum native cryptocurrency showed signs of low momentum and low volatility in line with the overall crypto market last week. However, the last 24 hours indicate a return of volatility and in favor of the bulls.

ETH traded at $1,728 which represents an almost 5% upside within the last 24 hours at press time.

Source: TradingView

A bullish outcome may have been more likely after ETH’s dip into oversold territory. However, the market was covered by a crowd of uncertainty due to inflation-related FUD. A catalyst was thus necessary to strengthen the market confidence, hence the likelihood of a bullish outcome.

The real reason behind the rally

Tuesday’s bullish volume was not a fluke but rather the result of reports that Greyscale won a legal battle against the U.S. Securities and Exchange Commission (SEC). The investment management previously filed a lawsuit against the U.S. regulator over the denial of an ETF application. ETH was among the cryptocurrencies that saw a robust wave of bullish volumes following the announcement.

Cryptocurrency prices rose across the board on the back of the greyscale win, with Bitcoin up nearly 6%. Short-term options IV started to rise rapidly, with BTC weekly options IV rising to 50%. Buy calls began to be traded in large quantities, especially ETH chasing a very large…

— Wu Blockchain (@WuBlockchain) August 29, 2023

The ruling may give Grayscale’s ETF application a chance at possibly being approved. The market reacted with bullish excitement because an approved ETF would allow institutions to legally own cryptocurrencies, thus resulting in a wave of institutional demand.

The ruling also means there is a significant chance that the SEC might make a fairer decision on recently filed ETF applications.

Read Ethereum’s [ETH] price prediction 2023-24

The newfound confidence in the market courtesy of the Grayscale win rejuvenated the demand for top cryptocurrencies including Ethereum. According to X-based analyst Ali, open interest registered a massive spike following the judicial decision.

That’s a $1 billion spike in open interest in just 60 minutes! 👀 pic.twitter.com/rp5OJs0bMA

— Ali (@ali_charts) August 29, 2023

A closer look at ETH’s open interest confirmed that there was a pivot in the metric. It confirmed a bit of an uptick back to 18 August levels. This also means that the open interest level was still considerably lower than it was at its mid-month levels.

The bullish pivot also resulted in short-leveraged position liquidations. As a result, this added to the buying pressure in the market, as liquidated traders were forced to buy to cover their downside.

Glassnode alerts revealed that ETH futures contracts short-positioned soared to a new monthly high on Ethereum in the last 24 hours.

📈 #Ethereum $ETH Futures Contracts Short Liquidations just reached a 1-month high of $3,533,794.89 on #Binance

Previous 1-month high of $3,140,352.18 was observed on 23 August 2023

View metric:https://t.co/QCh1EMEASc pic.twitter.com/USkcvss3RW

— glassnode alerts (@glassnodealerts) August 29, 2023