Analysis: Ethereum Hits New High as Momentum Shifts, Surging Market Leverage Raises Tail Risk

On August 27th, Vetle Lunde, the research director of K33, stated that a long-term holder exchanged 22,400 BTC for ETH. This action propelled Ethereum to a new all-time high last week, demonstrating a shift in market momentum. However, Bitcoin's recent price weakness may not have ended yet. The surge in leverage and significant fund rotation to Ethereum continue to put pressure on Bitcoin in the short term. Bitcoin's perpetual futures nominal open interest (OI) has soared to a two-year high, exceeding 310,000 BTC (approximately $34 billion). It has increased by 41,607 BTC in the past two months and had a spike of 13,472 BTC over the weekend, indicating a potential turning point. Bitcoin's annualized funding rate has jumped from 3% to nearly 11%, showing increasing aggressiveness in taking long positions during a period of relative price stagnation. Lunde stated that the current situation is similar to the leverage accumulation in the summers of 2023 and 2024. Both events triggered violent liquidation cascades in August. The peak in OI occurred in the late stages of the month, suggesting that the market may enter a longer period of consolidation, and bottom-buyers may get trapped. Lunde warned, "There is a high risk of a squeeze on long positions in the short term. Therefore, it is advisable to maintain a conservative position until excess leverage is cleared from the market." Historically, Ethereum hitting all-time highs has often signaled the overall market top in the crypto market. The cycles of 2017 and 2021 showed a similar pattern: Ethereum breaking out, other crypto assets skyrocketing, and Bitcoin stagnating due to weakening demand. This raises concerns that the bull market is nearing its end. However, the current BTC market dominance remains high at 58.6%, much higher than the previous peak of under 40%. With Ethereum showing relative strength and maturity, traders are watching to see if this cycle will follow the historical trajectory or deviate completely.