Key takeaways:
Ether surged 5% following a “Monday trap,” but leverage risks are increasing as Binance’s ELR reaches all-time highs.
Stablecoin inflows of $1.65 billion and 208,000 ETH withdrawals indicate robust accumulation.
ETH holding above $4,700 opens the path to $5,000, while falling below it could trigger a more significant correction.
Ether (ETH) demonstrates resilience compared to Bitcoin (BTC), shaking off the recent “Monday Trap,” a recurring scenario where leveraged longs experience severe liquidations at the week’s start. While ETH surged by 5% on Tuesday, BTC saw only a 1% gain.
Data indicates that Mondays typically see the highest long liquidations, with spikes exceeding 300,000 ETH during draws in April and June. This trend highlights how weekend optimism turns into losses when liquidity returns early in the week.
Weekly Trends in Ether long liquidations. Source: CryptoQuant
Despite this recovery, ETH’s derivatives market signals overheating. Binance’s Estimated Leverage Ratio (ELR) for ETH has reached a record 0.53, a significant rise from 0.09 in mid-2020.
ELR tracks the ratio of open interest to exchange reserves, providing insights into how heavily traders are employing leverage. Elevated values hint at excessive optimism and an increased risk of forced liquidations.
On Aug. 22, ETH open interest hit a new all-time high of $70 billion, which indicates short-term risk since high leverage often leads to sharp liquidation events that clear positions before upward movements.
Ether Estimated Leverage Ratio: CryptoQuant
Nevertheless, spot flows show a contrasting strength. Crypto analyst Amr Taha highlights that Binance saw over $1.65 billion in stablecoin deposits this month, marking the second surge above $1.5 billion in August.
These inflows indicate new liquidity entering the market. Concurrently, nearly 208,000 ETH, equivalent to about $1 billion, was withdrawn from Binance between Aug. 24–25, showing that investors are moving assets to cold storage, minimizing sell-side pressure and strengthening long-term bullish positioning.
The rise in leverage alongside institutional accumulation places ETH at a critical juncture. While liquidity inflows and exchange outflows appear bullish, extreme leverage amplifies the potential for near-term volatility.
Related: SharpLink added $252M ETH last week, $200M war chest left
Ether bulls must reclaim $4,700 to regain control
Ether made a significant rally on Tuesday, reaching $4,579 after absorbing liquidity from a daily order block and retesting long-term support at $4,350. Momentum on lower timeframes remains favorable, but sustainability is crucial for continuation.
On the mid-term chart, price action is currently addressing a bearish fair value gap between $4,600 and $4,450, with risks extending toward the $4,000 level if selling persists.
Ether four-hour chart. Source: Cointelegraph/TradingView
To invalidate this gap, ETH must reclaim previous equal lows near $4,662 and secure a decisive daily close above $4,700. This would align both lower and higher time frame structures, restoring bullish momentum and paving the way to $5,000.
In contrast, ongoing consolidation below $4,700 might indicate that the rally is primarily driven by short covering, where the closing of short positions creates temporary upward pressure, while sellers look to re-enter at higher prices.
Failing to reclaim $4,700 keeps ETH confined within a determined range between $4,700 and $4,350, with a break below $4,350 potentially triggering a deeper correction aligned with seasonality and a shift in market structure.
Until then, $4,700 remains the pivot point determining whether a correction occurs or a renewed bullish trend emerges.
Related: Price predictions 8/25: SPX, DXY, BTC, ETH, XRP, BNB, SOL, DOGE, ADA, LINK
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
