Ethereum went back below the $3,200 level after the Federal Reserve decided to cut interest rates by 25 basis points. This initially increased risky assets but quickly shifted market sentiment towards uncertainty. Although the broader macro backdrop is now tilting towards looser monetary conditions, Ethereum's response suggests traders remain cautious, especially after the sharp rise in the $2,800 region earlier this month.
According to the latest data from CryptoQuant, Binance’s Ethereum expected leverage ratio It almost hit an all-time high of 0.579. This is a sign that the ETH market has entered a very sensitive and potentially volatile phase as public leveraged positions are growing faster than the underlying spot holdings on exchanges. This extreme leverage typically reflects heightened risk appetite and often precedes periods of rapid volatility.
These dynamics mean that much of Ethereum's recent price movement has been driven by leveraged speculation rather than organic demand. With funding structures expanding and traders aggressively taking upside positions, even the slightest price movement can trigger a series of liquidations, amplifying market movements in either direction. With Ethereum hovering near key support zones, the combination of elevated leverage and post-FED uncertainty sets the stage for a volatile and decisive period ahead.
Ethereum’s leveraged structure indicates growing vulnerability.
Arab Chain explains that Ethereum’s historically high leverage ratio signals a structural imbalance in the market. If the amount of public contracts funded by leverage grows faster than the actual spot ETH on the platform, the entire ecosystem becomes more susceptible to sudden volatility.
In these situations, traders face increased risk of liquidation due to moderate price movements, regardless of whether the price movement is rising or falling. Historically, peaks in this indicator have coincided with periods of extreme price pressure. This is because excessive leverage magnifies the market's reaction to relatively small changes in demand or sentiment.
At the same time, Ethereum is currently trading near $3,300, creating a worrying confluence. This means that price increases are supported by leverage-based speculation rather than strong inflows or actual spot demand. These types of rallies are inherently unstable. As leverage continues to rise at these extreme levels, the market becomes increasingly vulnerable to a sell-off resulting in rapid liquidation if prices fall.
However, there is an alternative route. If ETH price continues to build momentum while leverage ratios drop slightly, the market could regain a healthier structure, providing a more solid foundation for a continued upward trend. Currently, the estimated leverage ratio remains one of the most important indicators in evaluating Ethereum's near-term direction.
ETH Price Action Details
Ethereum was recently rejected. $3,350~$3,400 The zone highlights the challenges facing bulls as the broader trend remains under pressure. The chart shows ETH retreating in the following direction: $3,200 This is the area following a sharp attempt to break the 100-day moving average (red line). This level continues to act as a major dynamic resistance, repeatedly limiting upward momentum throughout November and December.
Despite recovering from recent lows below $2,900, ETH has yet to clearly regain its 50-day moving average (blue line). The inability to close decisively beyond that reinforces the idea that this bounce is more corrective than impulsive. Meanwhile, volume on the recent uptrend has been moderate, suggesting buyers are not aggressively entering these levels.
The downside is that the $3,050-$3,100 area is emerging as a short-term support area. A daily close below this zone could open a path back to $2,900 if risk sentiment worsens after the FOMC. Conversely, a regain and hold above $3,350 would be the first sign of renewed strength, potentially targeting the next $3,550.
Featured image from ChatGPT, chart from TradingView.com
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