ETH Open Interest Divergence Reversal

Hypothesis

A futures-specific contrarian strategy on ETHUSDT that detects divergences between price action and open interest to identify exhaustion points. When ETH price makes a new local high but open interest is declining (bearish divergence), it signals that the rally is driven by closing shorts rather than new longs opening — weak conviction that tends to reverse. Conversely, when price makes a new local low but OI is rising (bullish divergence), it signals aggressive new short positioning that often triggers short squeezes. Uses 4-hour bars for signal generation with open interest supplementary data. The strategy compares a rolling N-bar price high/low against the slope of open interest over the same window to detect divergence. This is a crypto-native edge — OI data is uniquely available in crypto futures markets and provides information about positioning that traditional markets lack. Target ~80-150 trades per year on 4H ETH, with average holding period of 2-5 days.