As the Ethereum (ETH) derivatives market continues to show unprecedented growth, the Ethereum market may now be facing a significant momentum shift.
In particular, while Bitcoin's price movements continue to dominate the market, Ethereum's derivatives activity suggests it may be preparing for significant upward momentum.
ETH open contracts and leverage ratio hit new highs
According to recent analysis by CryptoQuant's EgyHash, Ethereum's open contracts have surpassed previous historical highs, growing by 40% in just four months, exceeding the $13 billion threshold.
The surge in open contracts (representing the total number of outstanding derivative contracts) reflects the increasing participation of traders and institutions in the Ethereum market.
Additionally, EgyHash also mentioned that the funding rate has turned moderately positive, indicating that long position traders currently dominate. This aligns with sentiment favoring further price increases for ETH in the short term.
The increase in open contracts is not the only indicator of Ethereum's activity increase in the derivatives market. CryptoQuant analysts pointed out Ethereum's estimated leverage ratio.
EgyHash revealed that this metric, calculated based on the ratio of open contracts to exchange currency reserves, has also reached a historical high of +0.40.
When commenting on what these rising indicators mean for market participants, CryptoQuant analysts wrote:
While these trends highlight positive sentiment towards ETH in the market, caution is still warranted due to potential risks. If prices fluctuate suddenly, the increase in leverage and dominance of long positions could heighten the risk of a long squeeze, potentially leading to a market adjustment.
Ethereum market performance
Regardless of how positive the key indicators are, Ethereum remains one of the underperforming cryptocurrencies in the market, especially compared to Bitcoin.
In particular, despite Bitcoin continuously breaking major resistance levels to set new highs, ETH is still down 36.2% from its all-time high of $4,878 set in 2021.
However, as of today, the asset seems poised to enter an upward trend. At the time of writing, Ethereum has risen 0.9% in the past day, currently trading at $3,112.
Prominent analyst Ali on X recently shared his views on the asset, noting that Ethereum may soon surpass Bitcoin. The analyst cited several key indicators and trends to support this claim.
According to Ali, the altseason indicator is flashing buy opportunities, and ETH's MVRV momentum is nearing a key moving average, indicating substantial upside potential.
The analyst also mentioned increased inflows into spot exchange-traded funds (ETFs) and whale activity. Ali then stated that Ethereum may test levels of $4,000 and $6,000 based on the rising parallel channel. He also emphasized the bullish theory that ETH could reach $10,000.
