"2 Trillion Leverage Evaporates"...Ethereum: After 'Forced Liquidation,' Will It Soar or Plummet?

▲ Ethereum (ETH)

Approximately $2 billion worth of leveraged positions evaporated in the Ethereum (ETH) derivatives market in a short period, raising the possibility of a market structure change.

According to cryptocurrency specialized media NewsBTC, the open interest in the Ethereum futures market recently decreased by over $2 billion in just 7 days, indicating a massive deleveraging (reduction of leverage). In particular, approximately $323 million was withdrawn from Binance and about $1.7 billion from Gate.io, confirming rapid liquidations concentrated on some exchanges.

In the case of Gate.io, open interest plummeted from approximately $4.67 billion to $2.88 billion, an unusual trend showing about a 38% decrease on a single exchange basis. This rapid reduction is analyzed to reflect selling pressure characteristic of forced liquidation rather than simple position closing.

Market sentiment is also rapidly cooling. Funding rates on most derivatives exchanges have re-entered negative territory, which means short-selling positions are maintained by paying a fee, indicating that bearish sentiment has become dominant in the short term.

The key question is whether this 'leverage collapse' is a bearish signal or, conversely, a signal of a bottom formation. The same structure has already been repeated once. A similar scale of deleveraging occurred at the end of March, which at the time served as an opportunity to form a price bottom.

Past cases show that after leverage liquidations, excessive speculative positions accumulated in the market are removed, reducing further downward pressure, and subsequently, a basis for rebound is established. Indeed, after previous deleveraging events, Ethereum did not continue to fall but defended its price and transitioned into a recovery phase.

Currently, Ethereum continues to trade sideways below major resistance. While the price maintains a certain level, upward momentum is limited, and the market is evaluated to be in an unstable equilibrium awaiting a directional decision.

*Disclaimer: This article is for investment reference only, and we are not responsible for investment losses based on it. The content should be interpreted for informational purposes only.*