Analysis: Ethereum's New High Signals Momentum Shift, Surge in Market Leverage Raises Concerns of a Bull Trap

BlockBeats News, August 27, K33 Head of Research Vetle Lunde stated that a long-term holder exchanged 22,400 BTC for ETH, driving Ethereum to a new all-time high last week and highlighting a shift in market momentum. However, the recent weakness in Bitcoin prices may not be over yet, as a surge in leverage and a significant rotation of funds into Ethereum continue to put short-term pressure on Bitcoin. Bitcoin perpetual futures nominal open interest (OI) has soared to a two-year high, exceeding 310,000 BTC (about $34 billion), with an increase of 41,607 BTC over the past two months, including a surge of 13,472 BTC last weekend, signaling a potential inflection point. Bitcoin's annualized funding rate jumped from 3% to nearly 11%, indicating increasingly aggressive long positions during a period of relatively stagnant prices.

Lunde noted that the current situation is similar to the leverage accumulation seen in the summers of 2023 and 2024, both of which triggered severe liquidation cascades in August. This OI peak occurred later in the month, suggesting the market may be entering a longer consolidation period, and bottom-fishing buyers could get trapped. Lunde warned: "In the short term, there is a high risk of long position squeezes, and it is advisable to maintain a conservative position until the market clears excess leverage."

Historically, Ethereum reaching new all-time highs often marks the overall top of the crypto market. The 2017 and 2021 cycles showed similar patterns: Ethereum breaks out, other crypto assets surge, and Bitcoin stagnates due to weakened demand, raising concerns that the bull market is nearing its end. However, the current BTC market dominance remains as high as 58.6%, much higher than the less than 40% seen at previous peaks. As Ethereum's relative strength matures, traders are watching to see whether this cycle will follow historical patterns or diverge completely.