Analysis: Ethereum rally driven by leverage, not fundamentals

In a recent update on X, crypto services provider Matrixport highlighted that Ethereum’s (ETH) latest breakout is being driven by leverage rather than underlying fundamentals. The funding rate has surged to 13.7%, its highest since February, a level that typically attracts bullish ETH ETF inflows. More significantly, ETH futures open interest is nearing its December 2024 peak, suggesting that leveraged traders, not spot buyers, are leading the rally. Matrixport also noted a sharp rise in ETH call option activity, which has triggered gamma hedging—a strategy where traders adjust their positions to stay balanced as prices move. This type of hedging increases the risk of sudden price gaps and makes the ETH market more fragile and reactive to momentum shifts. In contrast, Bitcoin (BTC) continues to be primarily driven by spot demand.