Contract open interest is a very important trading indicator, which reflects the leverage level of the market and thus reflects the risk status of the market.

Although open interest is not very useful for judging short-term trends, it is very helpful for judging medium-term trends. Once the open interest is too high, it means that the market leverage is too high and the downside risk will increase:

First: Although the price in April this year was lower than the high point in March, the open interest denominated in ETH was higher, indicating that the leverage ratio has increased. It is difficult to rise at this time. So it fell further later and stopped falling after the leverage ratio was low enough.

Second: After the news of the approval of the Ethereum spot ETF in May came out, while the price of ETH rose, the open interest of Ethereum contracts rose faster, and the market leverage ratio was significantly higher than the first one. The market risk accumulated too quickly, resulting in a fall below the low point in May in early July. The positive news of ETF approval has become a trap to lure more.

Third: After the listing of the Ethereum spot ETF in July, the market leverage ratio further increased, even exceeding the second one. The result of the high leverage ratio was the 8.5 plunge. The positive news of ETF listing has once again become a trap to lure more.

In general, the reason why the Ethereum ETF's positive news failed to drive ETH up and instead became a trap to lure more investors is that the Ethereum holdings are too high. Only when the market leverage ratio is low enough can a new upward trend be launched.