Journalist

Posted: September 8, 2023

• Open interest around ETH hit its highest level since the Shanghai Update, signaling increased liquidity.
• The USDC/ETH liquidity pool could push ETH higher.

The way Uniswap [UNI] Liquidity Providers (LPs) that were using their capital showed that they were bullish on Ethereum price action. [ETH], Glassnode revealed. To gauge this sentiment, Glassnode considered the upside and downside deployment of capital.

Read Ethereum [ETH] Price prediction 2023-2024

Distribute liquidity around ETH

The on-chain data provider, in its Sept. 6 post on X (formerly Twitter), noted that 8.6% of liquidity leaned higher, 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 (approximately 30.4% of the capital) is located within a price range of 11%, with an expected fall of -2.7% and a gain of +8.6%.

A second level of liquidity is positioned with a cushion of -8.5% to the downside and a cushion of +23.7% for… 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 suggests otherwise, and some on-chain metrics could test this sentiment, including ETH futures and options volume.

According to Glassnode, ETH futures and options volume was $8.3 billion on September 4. The volume of an asset and the open interest describe the liquidity and activity options and futures contracts.

So when the metric increases, it signifies an increase in interest in an asset, although it can also serve as a measure of strength. Conversely, the opposite occurs when the volume of futures and options decreases.

Source: Glassnode

But Glassnode noted that the aforementioned value was the highest ETH had experienced since the Shanghai Update. Therefore, the average derivatives volume is a sign of a strong belief in ETH price action on the upside. Regarding open interest, Glassnode noted that:

“Given that there have been no significant changes in trading volumes for either market in August, this suggests that traders continue to move liquidity up the risk curve.”

LPs keep reserves in a high state

Another metric supporting the bullish sentiment for Uniswap LPs is ETH put vs. call volume. After declining for a while after BlackRock’s win, the odds versus call volumes have risen since the partial win at Grayscale. This means that LPs were rotating capital into ETH contracts.

Source: Glassnode

Looking at the concentration and distribution of liquidity, the on-chain data showed that there was short-term volatility. This volatility has served as a key driver for the distribution of Uniswap’s liquidity pool. Therefore, it was necessary to check the USDC/ETH Uniswap pool.

Realistic or not, here is UNI’s market cap in terms of ETH

Based on the chart below, upside volatility is expected to increase by 22.14%, with ETH value around $1,624. If Uniswap LPs hold reserves with a high concentration of liquidity, then ETH might have no choice but to break above $1,700.

Source: Glassnode

However, if the rally cools, then ETH may continue to consolidate. But at press time, an uptrend was more likely than a downtrend.

source: ambcrypto.com