Key Points:
Ethereum rose 5% after the "Monday Trap," but with Binance's ELR reaching an all-time high, leverage risks are increasing.
The $16.5 billion inflow of stablecoins and the withdrawal of 208,000 ETH indicate strong accumulation.
ETH remains steady at $4,700, maintaining the possibility of hitting $5,000, while a drop below could face a larger correction.
Ethereum (ETH) has shown resilience compared to Bitcoin (BTC) after breaking free from the latest "Monday Trap." The "Monday Trap" refers to the recurring phenomenon of long liquidations at the beginning of the week. On Tuesday, ETH rose as much as 5%, while BTC's increase was only 1%.
Data shows that Mondays are consistently the peak time for long liquidations, with liquidation peaks exceeding 300,000 ETH during corrections in April and June. This pattern highlights that the optimism from the weekend often turns into losses after liquidity returns.
Despite ETH's rebound, the derivatives market shows signs of overheating. Binance's ETH leverage ratio (ELR) has risen to a historic high of 0.53, compared to just 0.09 in mid-2020.
ELR measures the ratio of open contracts to the exchange's reserves, reflecting the degree of leverage used by traders. A higher value indicates excessive optimism in the market, increasing the risk of forced liquidations.
As ETH open contracts reached a historic high of $70 billion on Friday, such extreme conditions signal short-term risks, as excessive positions often trigger severe deleveraging before the next rally, cleansing the market.
In contrast, spot fund flows show a strong picture. Crypto analyst Amr Taha noted that Binance saw a net inflow of stablecoins exceeding $1.65 billion this month, breaking the $1.5 billion mark for the second time since August.
These inflows indicate that new liquidity is preparing to enter the market. Meanwhile, the total withdrawal of Ethereum from Binance reached nearly 208,000 ETH, or $1 billion, from Sunday to Monday, indicating that investors are moving assets to cold wallets, reducing selling pressure and strengthening long-term bullish positioning.
The rise in leverage combined with institutional fund accumulation puts ETH at a crossroads. Although liquidity inflows and exchange outflows lean bullish, extreme leverage increases short-term volatility risks.
Ethereum rebounded strongly on Tuesday, absorbing liquidity from the intraday order zone and retesting the long-term support level at $4,350, before the price rose to $4,579. Short-term momentum remains positive, but sustainability is key for further increases.
On the mid-term chart, the current price is filling the bearish value gap between $4,600 and $4,450. If selling pressure continues, the risk may extend to $4,000.
To invalidate this gap, ETH must reclaim the previous low around $4,662 and achieve a strong daily close above $4,700. This move would synchronize short-term and long-term structures, restoring bullish momentum and opening space for a push towards $5,000.
Conversely, if it continues to consolidate below $4,700, it indicates that this rebound is mainly driven by short covering. Short covering brings temporary upward pressure, while sellers wait to re-enter at higher levels to push prices down.
If it fails to reclaim $4,700, ETH will be locked in a key range between $4,700 and $4,350, and a drop below $4,350 could trigger a deeper correction, aligning with seasonal characteristics and potentially leading to a market structure shift.
Before that, $4,700 remains the watershed between correction and a new rally.
Related: If three key factors are met, Solana (SOL) is expected to rise to $250.
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