Ethereum’s surge to $3.6K: Speculation fuels rise, but is a pullback still likely?

• Ethereum’s surge to $3.6K is more speculative in nature, as whales capitalize on high volatility. 
• With open interest (OI) reaching an all-time high, the $4K target for ETH seems more distant.

Ethereum [ETH] has surged nearly 15% this week, reclaiming $3,600 for the first time in seven months. Despite a week of profit-taking and consolidation after each long green wick, no significant pullback has occurred.

FOMO-driven buying suggests leverage on retracements, with weak hands exiting, positioning ETH for a potential rebound. However, this rally is largely driven by high-leverage futures, with open interest for both longs and shorts hitting a record $24.08 billion.

While Bitcoin’s ‘slight’ recovery adds optimism, Ethereum’s breakout to $4K seems unlikely due to significant liquidity buildup, leaving the door open for a correction unless key conditions align.

High leverage could present a strong resistance barrier

In the past 24 hours, total liquidations hit $283.12 million, with shorts taking the hardest hit, losing nearly $173 million. This comes as the market recovers, with most major coins posting strong gains, including ETH, which surged almost 9% to reclaim the $3.6K range.

Notably, ETH saw the largest liquidation order on Bitmax, totaling $2.81 million. Whales, who accumulated around 50 million ETH tokens, likely triggered a major short-squeeze, pushing the price into a key resistance zone.

Source : Coinglass

Now, the real test begins. A short-term target of $4K could materialize if whales continue their strategy in the coming days, stabilizing the price around $3.8K. This could turn $3.8K into a psychological level, attracting new market interest and paving the way for a potential breakout to $4K.

However, you must consider both internal and external factors. Bullish activity across various data sets is crucial to hitting the short-term target.

Without it, Ethereum’ surge could face a roadblock. With record-breaking activity in the derivatives market, even a small divergence could give bears an opportunity to exert pressure.

The result? Short-sellers may take control, leading to a short-term correction back to the $3.5K range.

Ethereum’s surge likely at the mercy of whale support

From this chart, it’s clear that more investors are taking on high-leverage risk in derivative trading, with the leverage ratio reaching an all-time high.  This suggests that the recent surge is driven more by speculation than by fundamental factors.

This is unsurprising, considering that, as the second-largest cryptocurrency by market cap, Ethereum’s price movements tend to mirror those of Bitcoin. Investors closely monitor BTC’s actions to determine whether to go long or short on ETH.

Now, with Bitcoin rebounding by more than 4% and bouncing back into the $95K band, Ethereum bulls have responded positively. Whales see this as a key catalyst for a short-term surge.

Additionally, over the past four days, net flow has turned positive as more weak hands exit the market.

Source : CryptoQuant

However, unlike previous cycles, where each green bar signaled a potential top and an impending correction, whales absorbed the pressure this time, driving a nearly 10% price surge.

That said, the mounting pressure around the current price should not be underestimated, as Ethereum’s surge increasingly relies on continued whale support.

But what happens if that support falters? As of now, the volatility index stands at 66, which is relatively high compared to typical markets. This suggests that investors may be anticipating significant price movements over a short period.

As a result, whales have likely focused on the volatility gripping the market. With uncertainty surrounding Bitcoin’s near-term movements, their attention has shifted toward high-cap tokens.

Read Ethereum [ETH] Price Prediction 2024-2025

This makes Ethereum’ surge toward $3,600 less stable and more speculative, with the $4K target remaining elusive unless whales continue to accumulate, even during bullish periods, thereby driving the surge on a more ‘fundamental’ basis.

Until then, consolidation seems more likely, with a potential correction on the charts if whales lock in their gains, allowing shorts to take control.