Ether is under severe market pressure with leverage reaching all-time highs and withdrawals in ETFs amounting to over $74 million, driving the market around the 3,000 price point.
Ether is experiencing an increasing market pressure as its Estimated Leverage Ratio (ELR) has reached a record of 0.5617, which signifies excessive open market risks.
This Binance data reveals a record level of leverage, the highest leverage ever recorded, occurring at the time Ethereum was trading at approximately 3,027.
Source – Cryptoquant
This high leverage implies that traders are very dependent on the borrowed capital, which is a weak condition prone to sudden fluctuations in prices.
Spikes in leverage in the past tend to cause dramatic reversals in prices due to a hasty liquidation of leveraged positions.
To compound this, recent Ethereum exchange-traded funds (ETFs) experienced large withdrawals, amounting to 74.2 million within one day.
BlackRock alone sold $165.1 million of Ethereum, which indicates a wary attitude by institutional investors.
Source- X
Such withdrawals are combined with a duration of increased leverage accumulation, escalating downside risks on Ethereum.
Record Leverage Ratio Signals Potential Volatility
The tremendous increase in the leverage of Ethereum only indicates that traders are taking their bets to new levels, even though this cryptocurrency is stagnating around a price of approximately 3,000 US dollars.
A metric of risk, the Estimated Leverage Ratio, which is the ratio of open interest to available reserves, rose dramatically and reflected risk concentrations never seen in earlier cycles.
Historical trends indicate that such high leverage spurts are followed by violent price action that could be a severe decline or a significant acceleration, contingent upon sales of short or long positions.
The situation leaves the market balancing on the edge, with leverage taking the lead over real trading volume. Abrupt price changes can trigger forced liquidations, which increase volatility on either side.
This gives an uncomfortable mood to Ethereum traders and ETF investors, particularly when there are larger bearish distributions of ETFs.
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Massive ETF Outflows Amplify Market Pressure
There seems to be institutional turnover towards Ethereum, with recent massive ETF withdrawals.
That $74 million outflow that occurred yesterday is not an isolated incident but relates to a larger trend of large funds such as BlackRock and Fidelity effectively selling their Ethereum assets in droves.
BlackRock Ethereum sales amounted to $165.1 million, which greatly added to the outflows. Such exits occur following a span of consistent inflows, implying renewed caution among institutions contributing to the short-term market difficulties.
Increased leverage risks, coupled with this selling pressure, make the scenario complex. These ETF withdrawals cut institutional demand, which may put pressure on the price of Ethereum and add volatility induced by the high leverage environment.