Ethereum has lost some upward momentum after nearing its all-time high, reflecting a broader correction across the cryptocurrency market. The second-largest digital asset by market capitalization reached $4,776 last week, just shy of the record $4,878 set in 2021, before pulling back.
At the time of writing, ETH is trading at $4,280, reflecting a 5.7% decrease in the past 24 hours and nearly $500 lower than the recent peak. This decline occurs amid analysts closely monitoring trading activity in the derivatives market.
According to data shared by CryptoQuant's CryptoOnchain analyst, the number of retail investors participating in the Ethereum futures market has significantly increased in recent sessions. This vibrant trading activity, combined with high open interest, has sparked debate on whether the market is heading towards a breaking point.
Ethereum Futures Market Shows Signs of Overheating
CryptoOnchain noted that Ethereum's futures trading frequency has entered the zone he describes as "Many Retail" and "Too Much Retail", thresholds that often appear near the tail end of a strong uptrend.
“Retail participation has surged as ETH price surpassed $4,500,” he explained, adding that such conditions often lead to greater volatility and sudden drops.
Additional indicators also support this cautious view. The analyst highlighted Ethereum's futures trading volume bubble map, which currently shows large red bubble clusters near recent price highs. He stated that these patterns often precede strong breakouts or quick corrections when excessive leverage is unwound.
Meanwhile, open interest (OI) on Binance futures has risen to nearly $12 billion before dropping back to around $10.3 billion. Although still at record highs, the recent decline suggests that some traders may have reduced their holdings.
"A massive increase in open contracts near price peaks may fuel the next bullish momentum or trigger sell-offs when the market reverses," CryptoOnchain wrote. He also pointed out that the buy/sell ratio of buyers on Binance remains below 1, indicating that selling pressure has dominated trading activity in recent days.
Spot Market Volatility Brings a Different Perspective
Not all analysts view the current pullback as an immediate sign of market stress. In a separate post, CryptoQuant contributor Woominkyu noted that the funding rate for ETH perpetual futures remains stable around 0.
This contrasts with previous bull runs in 2020–2021 and early 2024, when funding rates surged above 0.05–0.10, signaling overheated long positions.
“ETH just surpassed $4,200, but capital remains stagnant,” Woominkyu explained. “That indicates the bullish momentum is driven more by spot buying rather than leverage.”
According to the analyst, this move indicates a relatively healthier market environment compared to previous bull runs, as it reduces the risk of forced liquidations. He added that a funding rate increase above 0.05 will be a threshold to watch for potential short-term peaks.
