ETH price action appeared to be on the verge of building up momentum for a sizable rally and even managed to push above $2,000.
However, that attempt was thwarted and price reverted below this price point.
ETH price exchanged hands at $1842.35 after a 1.33% jump in the last 24 hours.
This pullback was out of character especially considering that it was only just recovering after an overall downtrend since December.
ETH’s struggle to maintain an uptrend suggests that the cryptocurrency has been experiencing weak demand despite being in a healthy discount.
This trend might be pushing investors to embrace other coins that have recently been outperforming ETH.
Latest ETH Price Rally Expectations Were Backed by Robust Leverage Apettite
ETH’s inability to maintain a robust upside might be rooted in investor appetite for leverage.
A spike in open interest was observed earlier this week, while spot flows remained relatively weak.
This observation confirmed that the latest excitement among Ethereum investors was mostly in the derivatives segment.
The trouble with this especially in an over-leveraged setting is that it creates a setup for a liquidation event.
Interestingly, Ethereum’s estimated leverage ratio has been on the rise and recently surged to a new all-time high.
This high was significantly higher than it was during ETH’s peak in December, likely due to the expectations of a strong recovery rally.
The surge in open interest also confirmed rising optimism accompanied by demand in the derivatives segment.
According to CoinGlass, ETH open interest surged from $17.32 Billion to $19.94 Billion in the last 2 days.
Just over $42 Million worth of liquidations were observed in the last 24 hours. This means the market is still actively attempting a leverage shakedown.
ETH Bears are Not Done Yet
Ethereum exchange flow data confirm why the latest upside attempt was limited.
Exchange flows registered a mid-month uptick between March 16 and 18. After which they declined, confirming relatively weak demand.
Meanwhile, overall spot flows remained negative in the last 5 days confirming the weak demand narrative.
A diverging outcome compared to surging derivatives activity during the same period.
The high leverage appetite among ETH traders suggests risk of more liquidations if price dips lower.
It is also possible that the latest pullback could be another shakedown before strong demand makes a comeback.
It is worth noting that whale activity has also been on the rise. ETH will require robust demand from whales and institutions for it to achieve a significant upside.
The institutional demand side has been rather wanting. Spot ETF flows have been a sea of red so far this month.
Nevertheless, ETH is now on the spot with investors eager to see if it can capitalize as market sentiment jumps from fear to neutral.
This is mainly on account of the latest FED meeting which revealed a pause on hiking interest rates.
