ETH Price Rally Faces $4.7K Test: Will It Break Through?
ETH Rallies, $4.7K a Critical Juncture
Ether (ETH) is demonstrating strength against Bitcoin (BTC), recovering from recent dips. However, the $4,700 level remains a pivotal point for further gains.
Key Takeaways:
- Ether rebounded 5% after a leveraged long squeeze, dubbed a "Monday trap."
- Rising leverage, indicated by Binance's Estimated Leverage Ratio (ELR) hitting record highs, poses a risk.
- Significant stablecoin inflows ($1.65 billion) and ETH withdrawals (208,000 ETH) suggest strong accumulation.
- Holding above $4,700 could propel ETH toward $5,000, while failure risks a sharper correction.
Data indicates that Monday consistently sees the highest long liquidations, particularly during April and June pullbacks. This pattern highlights the shift from weekend optimism to losses at the start of the week.
Despite the price recovery, derivatives data signals potential over-leveraging. Binance's ETH Estimated Leverage Ratio (ELR) has surged to 0.53, a significant increase from 0.09 in mid-2020. A high ELR suggests excessive optimism and increased liquidation risk.
Open interest in ETH futures has reached a new all-time high of $70 billion, indicating short-term risk due to potential deleveraging events.
However, spot market data presents a bullish perspective. Binance saw over $1.65 billion in stablecoin deposits this month, signaling fresh capital entering the market. Additionally, nearly 208,000 ETH were withdrawn from Binance between August 24–25, indicating investors are moving assets into cold storage, reducing selling pressure.
The combination of rising leverage and institutional accumulation puts ETH at a crucial point. Liquidity inflows and exchange outflows support a bullish outlook, but high leverage increases the risk of near-term volatility.
Bulls Need to Reclaim $4,700
ETH rallied to $4,579 after retesting support at $4,350. Momentum is constructive on lower timeframes, but sustainability is essential.
Currently, price action is filling a bearish fair value gap between $4,600 and $4,450, risking a move toward $4,000 if selling pressure intensifies.
To invalidate this gap, ETH must reclaim prior lows near $4,662 and close above $4,700. This would align lower and higher timeframe structures, restoring bullish momentum and paving the way toward $5,000.
Conversely, if ETH remains below $4,700, it suggests the rally is driven by short covering. Failure to reclaim $4,700 keeps ETH range-bound between $4,700 and $4,350. A break below $4,350 could trigger a deeper correction.
Therefore, $4,700 remains the key pivot separating a correction from a renewed bullish phase.