• Ethereum has surged to a three-month high above $2,900 as bullish sentiment strengthens.
• The rising estimated leverage ratio and funding rates point towards rising speculative activity from derivative traders.

Ethereum [ETH] has gained by 20% in just two days, with the price oscillating between $2,400 and $2,950. At press time, ETH traded at $2,922, its highest level in over three months. 

The recent gains have been accompanied by rising volatility. In fact, the estimated leverage ratio has spiked significantly this week to a seven-day high. 

At press time, this metric stood at 0.42. This shows that 42% of the open positions on the derivatives market are backed by leverage. A build-up of leverage activity tends to heighten price volatility. 

However, the estimated leverage ratio has yet to hit extreme levels, giving Ethereum room to continue with the uptrend. 

Funding rates & open interest hit multi-month highs 

The newly opened positions on the derivatives market appear to be longs. This is seen in the rising funding rates to a three-month high. 

When funding rates are rising, it shows an influx of long positions. It also indicates that long traders are willing to pay a higher fee to maintain their positions, further suggesting that there is a bullish bias in the market. 

At the same time, Ethereum’s open interest continues to rise, and at press time, it was at a five-month high of $16.61 billion per Coinglass data. 

In the last two days, Ethereum’s open interest has increased by more than $3 billion, further showing that speculative interest in ETH is high. 

The spike in trading activity and open positions in the derivatives market increases the likelihood of high volatility. It could also indicate that ETH could be on the verge of an overheated market. 

However, technical indicators suggest that an ETH bull run could also be underway. 

Ethereum tests 200-day moving average 

Ethereum is currently testing crucial resistance at the 200-day Simple Moving Average (SMA) on its one-day chart. If ETH manages to flip this price level at $2,955, it could lead to a sustained uptrend.

Flipping this resistance could also pave the way for a 12% rally to the 1.618 Fibonacci level ($3,260). 

The Moving Average Convergence Divergence (MACD) suggests that more gains lie ahead. This metric has flipped positive and has also made a sharp move north, which shows that the uptrend is gaining strength. 

However, traders should watch out for signs of profit-taking as selling pressure could see the price drop to test support at $2,700. A drop below this support could usher in a downtrend. 

Are inflows to ETH ETFs driving the rally? 

On 7th November, the total inflows to spot Ethereum exchange-traded funds (ETFs) reached $79.74 million, their highest level since August according to SoSoValue. 

The Fidelity Ethereum Fund (FETH) ETF had the highest inflows of $28 million, followed by the BlackRock iShares Ethereum Trust with $23 million inflows. 

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Read Ethereum’s [ETH] Price Prediction 2024–2025

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The VanEck Ethereum Trust also recorded $12 million inflows marking its first inflows in two weeks. 

If the demand for ETH ETFs continues, it could bode well for Ethereum’s price.

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