Key takeaways:
Ether surged by 5% following a “Monday Trap,” though leverage risk is increasing as Binance’s ELR hits all-time highs.
Inflows of $1.65 billion in stablecoins and 208,000 ETH withdrawals indicate significant accumulation.
As long as ETH remains above $4,700, a move towards $5,000 is possible; however, falling below this level could trigger a more severe correction.
Ether (ETH) is proving resilient against Bitcoin (BTC) after overcoming the recent “Monday Trap,” a common occurrence where leveraged longs face sharp liquidations at the week’s start. While ETH saw a rally of up to 5% on Tuesday, BTC’s increase has been limited to just 1%.
Data shows that Mondays typically experience the highest liquidations of longs, with spikes exceeding 300,000 ETH during drawdowns in April and June. This trend highlights how weekend optimism shifts to losses as liquidity returns early in the week.
Despite the recovery, the landscape for ETH’s derivatives indicates potential overheating. The Estimated Leverage Ratio (ELR) on ETH at Binance has skyrocketed to a record 0.53, up from just 0.09 in mid-2020.
ELR measures the ratio of open interest to exchange reserves, serving as an indicator of leverage usage by traders. Elevated levels suggest an overly optimistic environment and increased risk of forced liquidations.
With ETH’s open interest reaching a new record of $70 billion on Friday, these extremes indicate short-term risks, as high positions can lead to significant deleveraging events that flush out traders ahead of the next upward move.
On the other hand, spot flows present a different narrative of strength. Crypto analyst Amr Taha notes that Binance has seen more than $1.65 billion in stablecoin deposits this month, marking the second surge over $1.5 billion in August.
These inflows reflect new liquidity set to enter the market. Concurrently, ETH withdrawals from Binance amounted to around 208,000 ETH, or $1 billion, over Sunday and Monday, indicating that investors are transferring assets to cold storage, which reduces sell-side pressure and strengthens long-term bullish positioning.
The interplay between rising leverage and institutional accumulation places ETH at a pivotal moment. While the inflow of liquidity and outflows from exchanges suggest bullish sentiment, extreme leverage increases the risk of short-term volatility.
Related: SharpLink added $252M ETH last week, $200M war chest left
Ether bulls must reclaim $4,700 to regain control
Ether showed strong gains on Tuesday, rising to $4,579 after absorbing liquidity from a daily order block and retesting long-term support at $4,350. Although momentum on shorter timeframes is constructive, sustainability is essential for continued upward movement.
On the medium-term chart, price movement is currently filling a bearish fair value gap between $4,600 and $4,450, with the risk of extending towards the $4,000 level if selling pressure continues.
For this gap to be considered invalid, ETH must reclaim previous equal lows near $4,662 and achieve a decisive daily close above $4,700. Such a move would align structures on both lower and higher timeframes, revitalizing bullish momentum and paving the way towards $5,000.
On the flip side, continued consolidation below $4,700 might imply that the rally is primarily driven by short covering, with shorts closing their positions generating temporary upward pressure while sellers aim to re-enter at higher levels to push the price down.
Failure to reclaim $4,700 keeps ETH locked in a critical range between $4,700 and $4,350, with a breakdown beneath $4,350 likely leading to a deeper correction consistent with seasonal trends and a potential shift in market structure.
Until then, $4,700 stands as the pivot point distinguishing between a correction and a renewed bullish phase.
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.
