‘Extreme Positive’: Ethereum (ETH) Back in Bull Market Mode

After recovering the $2,000 mark, Ethereum is displaying signs of strength, and data from the derivatives market now indicates a significant change in sentiment. The recent market-wide sell-off appears to have caused traders to quickly rotate back into risk, as evidenced by the spike in leveraged long positioning seen in funding rates across major exchanges.

Funding is everything

The BitMEX signal, where ETH funding has flipped into extremely positive territory, is the most noticeable. Positive funding rates — which usually indicate strong bullish conviction and aggressive leverage expansion — indicate that long traders are paying shorts to maintain positions open. The fact that Binance funding has moved from negative to neutral territory at the same time suggests that panic positioning and selling pressure are abating. 

But historically, this arrangement has presented both opportunities and risks. Strongly positive funding fueled by leverage expansion seldom sustains long-term upside, as analyst Amr Taha points out. Instead, it frequently raises the likelihood of abrupt corrections, particularly in the event that price momentum stalls or general market conditions deteriorate. Ethereum’s current structure, practically speaking, indicates improving sentiment, but it remains in a precarious recovery environment.

Volume catches up

Volume expansion indicates that traders are willing to reenter the market after the price recently recovered from severe oversold conditions. The larger downward trend has not yet been completely refuted, though, as ETH continues to trade below significant long-term moving averages. A more robust recovery phase might emerge if Ethereum is able to stabilize above $2,000 and progressively recover from resistance levels between $2,400 and $2,600.

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This could potentially boost confidence in other altcoins as well. That would be a confirmation that the recent panic flush was a short-term bottom rather than the beginning of a long-term bear market. However, the market may experience another surge in volatility as positions unwind if leveraged longs get overcrowded and momentum slows. Funding-driven rallies frequently come to an abrupt halt before a more robust trend takes over.

Ethereum has evidently returned to recovery mode for the time being, but how the price moves over the next few sessions will determine whether this is a long-term bull market continuation or merely another leverage-driven bounce.