Ethereum surged and then sharply fell: is it a dangerous signal or a good opportunity to buy low? Futures and spot data reveal key inflection points.

Ethereum (ETH) has shown a significant pullback after approaching its historical high, touching $4,776 last week, just a step away from the $4,878 set in 2021. However, as of now, ETH is reported at $4,280, with a 24-hour fall of 5.7%, retreating nearly $500 from its recent high. This drop occurred amid a surge in activity in the futures market, sparking debates in the market about “top signals” and “short-term adjustments.”

Futures Market Overheated? Retail Leverage Becomes a Hidden Concern

(Source: CryptoQuant)

CryptoQuant’s subsidiary CryptoOnchain data shows that the participation of retail investors in the ETH futures market has significantly increased recently, with active trading volume and open interest (OI) both at high levels.

Retail leverage is too high: When ETH broke through $4,500, retail trading enthusiasm surged rapidly, which historically tends to occur at the end of an upward trend.

Bubble Chart Warning: The futures trading volume bubble chart has shown a significant number of red bubbles near recent highs, indicating that the market may face severe volatility or margin liquidation.

Change in open interest: Large CEX ETH futures OI once approached 12 billion USD, then fell back to about 10.3 billion USD, indicating that some traders have reduced their positions.

CryptoOnchain Warning: “A sharp expansion of OI near the top could lead to a short-term breakout, but it may also trigger a rapid sell-off during a market reversal.”

Spot market signal: Financing rates indicate that bulls have not yet overheated

(Source: CryptoQuant)

Not all analysts believe that this pullback signifies the arrival of danger. CryptoQuant writer Woominkyu pointed out that the funding rate for ETH perpetual contracts is currently close to 0, compared to the high levels of 0.05–0.1 seen during the bull markets of 2020–2021 and early 2024, indicating that bullish leverage is not overheated.

Capital inflow stagnation: After ETH broke through $4,200, the influx of funds did not significantly increase, indicating that this wave of rise came more from spot buying rather than leverage-driven.

Market Health: Low financing rates mean that the risk of forced liquidation is relatively low, and the market structure is more robust than the past bubble-like rises.

Woominkyu believes that if ETH wants to reach a new high in the short term, a financing rate breakthrough of 0.05 will be the key threshold to observe bullish momentum.

ETH Technical Analysis and Key Price Levels

Upside resistance: $4,500 is the short-term resistance level. Once broken, there is hope to challenge the high of $4,776 again, and further approach the historical high of $4,878.

Downward support: $4,200 is the first support level, and if it falls below, it will test the $4,050–$4,000 range.

Volatility Risk: The coexistence of high leverage in the futures market and support from spot buying means that there may be intense fluctuations of “sharp rises and sharp falls” in the short term.

How should investors respond?

Short-term traders: Need to closely monitor changes in futures OI and financing rates to avoid chasing highs when leverage is overheated.

Medium to long-term holders: The spot buying pressure still has support, and a pullback to around $4,200 may be an opportunity for phased deployment.

Risk management: Set the stop-loss below $4,000 to prevent the pullback from evolving into a deep correction.

Conclusion

Ethereum is at a critical moment of “opportunity and risk coexist.” The retail leverage frenzy in the futures market sharply contrasts with the robust buying in the spot market. For investors, this could be both a warning bell for short-term risks and a good opportunity for medium to long-term buying. In the coming days, the trend of ETH will depend on whether the futures leverage cools down and whether the spot buying can continue to support the price.