XWIN Japan2025-09-26

Behind Ethereum’s Price Drop: Long Liquidations and OI Reset

Ethereum (ETH) has just undergone one of the largest derivatives market resets since 2024. According to CryptoQuant data, open interest (OI) across exchanges fell sharply, while hundreds of millions of dollars in long positions were liquidated. At the same time, investors accumulated nearly 570,000 ETH in a single week. Yet instead of rising, the price dropped by nearly 15%, falling from $4,587 to $3,880. Why does the paradox of “buying but falling” occur? The answer lies in the structure of the derivatives market. When long positions build up excessively, the market becomes fragile. Forced liquidations cascade through the system, generating large waves of sell pressure. Market makers and derivatives flows can accelerate this process, driving prices downward even in the face of strong underlying demand. The charts confirm this dynamic. Spikes in long liquidations align directly with sudden price drops. Meanwhile, the OI chart shows that similar resets occurred in 2021, 2023, and 2025, each time purging excess leverage and paving the way for a rebound. What appears on the surface as weakness often signals the clearing of unhealthy speculation, creating the conditions for a more sustainable rally. Price formation in crypto is not dictated by demand alone; leverage and market structure frequently dominate short-term movements. In the longer term, however, resets like this play a constructive role. They cleanse the market of excessive risk and establish a stronger foundation for growth. Ethereum’s recent drop should therefore not be seen as a contradiction, but as part of the recurring cycle of leverage and reset that defines crypto markets. History suggests that such corrections are often followed not by prolonged weakness, but by renewed strength. This downturn may well be the beginning of Ethereum’s next upward leg.