ETH leverage cools in sign of market stabilization, says analyst

The overheating in ETH leverage has subsided, a process that on-chain analyst Darkfost describes as market stabilization. In a contribution to CryptoQuant, he explained that ETH has been trading sideways in a range of $2,250 to $2,450 for nearly a month, following an approximately 33% rally from its low in February. During that rally, ETH open interest (OI) increased by about $4.5 billion, and the leverage ratio on Binance climbed to 0.76 on March 16, indicating an over-leveraged market. However, the funding rate remained mostly negative during this period, suggesting traders were primarily focused on short positions. The situation has now changed. As ETH retested the $2,450 resistance level, the leverage ratio on Binance fell to 0.57. This shift followed a recent turn to a positive funding rate, which coincided with an increase in long positions. The market interprets this as a rapid clearing of long positions that were opened in anticipation of a breakout, which occurred during the ETH correction. At the same time, accumulated short positions were liquidated, leading to a decrease in overall leverage. Darkfost assesses this not as a short-term bearish signal but as a sign that market overheating is easing. He noted, however, that a genuine upward breakout will depend on an influx of spot buying pressure rather than activity in the derivatives market.