Ethereum drops below $2,000 for the first time this year! However, futures open interest indicates that bears are increasing their positions.

Ethereum (ETH) falls below $2,000 for the first time since March this year, with a nearly 8% decline over the past 7 days and over 5% drop in the last 24 hours. Paradoxically, ETH futures open interest (OI) has risen for the third consecutive day to a record high of 16.39 million ETH, with a nominal value of about $32.5 billion, indicating increasingly aggressive leveraged short-selling behavior in the market.
(Background: Bankless founder liquidates all ETH holdings! Former team leaks: silent large-scale layoffs yesterday)
(Additional context: CryptoQuant reveals Ethereum’s “paradox of adoption”: user numbers doubled, but funds are fleeing, ETH may drop to $1,500 by year-end)

Table of Contents

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• "Loss of staking yields reduces attractiveness"
• "Is the 'ETH as currency' narrative coming to an end?"
• Short leverage increases, where is the next support?

Key Highlights

• ETH drops below $2,000 for the first time since March, with a 7-day decline of nearly 8%, while futures OI hits a record high of 16.39 million ETH
• US spot ETH ETF net outflows total $401 million this month, reversing April’s net inflow of $354 million
• Bankless co-founder David Hoffman liquidates all ETH holdings, believing the "ETH as currency" narrative has been fully priced in

Prices are falling, but positions are increasing. When the spot price of an asset continues to weaken while futures open interest hits new highs, it usually indicates someone is leveraging bets on further declines. Currently, ETH is trading around $1,980, down over 5% in 24 hours, with a nearly 8% drop over the past week, breaking the $2,000 mark for the first time since March. Meanwhile, futures open interest has risen for the third consecutive day to a record 16.39 million ETH, worth about $32.5 billion. Against the backdrop of ongoing spot market bloodshed, this derivative market signal warrants analysis.

"Loss of staking yields reduces attractiveness"

Markus Thielen, founder of 10x Research, points out that more investors are abandoning ETH. His core argument is direct and harsh: "ETH does not generate cash flow, and in the context of rising US bond yields, the appeal of staking yields is diminishing."

Data supports this view. The US 10-year Treasury yield remains above 4.6%, while ETH staking annual yields are only about 2.5%. The risk-adjusted spread has been compressed to levels unattractive to institutional investors. Putting money into US Treasuries offers zero volatility, no smart contract risk, and nearly double the yield—an obvious choice.

Institutional funds are voting with their feet. US spot ETH ETF net outflows this month total $401 million, completely reversing April’s net inflow of $354 million, and as of May 22, have recorded at least 10 consecutive days of net outflows. Thielen’s previous research indicates a high correlation between ETH price and the 30-day net inflow average of spot ETFs, meaning institutional fund flows are almost the main driver of price movements. When this pipeline begins to reverse, price pressure needs no further explanation.

"Is the 'ETH as currency' narrative coming to an end?"

On May 26, Bankless co-founder David Hoffman publicly announced he had liquidated all ETH holdings. He previously claimed to allocate 99% of his personal assets to Ethereum, but his stance has now flipped, shocking the market.

Hoffman’s argument is not bearish on the Ethereum network itself but questions whether value can flow back into ETH tokens: "'ETH as currency' narrative is not a failure; it has been fully priced in. Ethereum has achieved its market positioning, and I see no reason for ETH as an asset to be revalued."

This view echoes analysis from the Web3 research firm House of Chimera. The firm points out that the market is questioning whether Ethereum’s ecosystem advantages in DeFi, RWA, and tokenization can truly reflect back onto ETH tokens. Ethereum’s deliberately chosen scaling approach (rollups handling execution, applications capturing user profits, with Ethereum providing low-cost settlement security) is a victory for decentralization architecturally but creates a structural issue of value spillover in token economics.

Adding to the woes, since February, over 7 core team members or senior contributors have left Ethereum Foundation, including Protocol research co-lead Alex Stokes on leave, Josh Stark—who participated in multiple key upgrades like The Merge—resigning, and Protocol Guild coordinator Trent Van Epps departing. Talent attrition at the organizational level is translating into a loss of confidence in Ethereum’s development trajectory.

Short leverage increases, where is the next support?

Returning to derivatives, open interest has risen to a record high amid falling spot prices, a divergence that typically indicates new positions are predominantly short. The 16.39 million ETH open interest, equivalent to $32.5 billion, suggests market participants are leveraging bets on further ETH declines.

From a technical perspective, if ETH breaks below the current support at $1,980, the next key zone is between $1,800 and $1,850, which many analysts previously identified as a defensive line. Conversely, if there’s a short-term rebound to recover the $2,000 level, the first resistance is at $2,100 to $2,150. Notably, the high OI also means that if the market direction reverses sharply, short squeeze liquidations could be substantial.

Frequently Asked Questions

What does a record high in ETH futures open interest (OI) indicate?

An OI rising to a record 16.39 million ETH, especially when spot prices are falling, usually signals that short sellers are leveraging to increase their bets on further declines. Higher OI means that if the market reverses, liquidations could be large.

Why does rising US bond yields impact ETH prices?

ETH staking yields are only about 2.5%, while the US 10-year Treasury yield exceeds 4.6%. Institutional investors tend to prefer lower-risk, higher-yield assets like US Treasuries, leading to continuous capital outflows from the ETH ecosystem.