Data on the Estimated Leverage Ratio for Ethereum on Binance reveals a clear shift in trader behavior within the derivatives market. The indicator recently registered a reading close to 0.557, its lowest value since last December. This decline follows a period in which estimated leverage reached relatively high levels, peaking near 0.675, reflecting a market transition from a high-risk environment to a more conservative, rebalancing phase.
Such a decrease in leverage indicates that traders are reducing the size of their leveraged positions or closing a portion of their highly leveraged trades. Historically, these movements tend to occur ahead of the formation of new price bases, as market participants seek to reduce risk rather than pursue quick profits driven by excessive speculation.
The move from the 0.675 level to around 0.557 is not merely a simple technical fluctuation; it reflects a shift in overall market sentiment. During periods of high leverage, the market is more prone to sharp fluctuations and sudden sell-offs, while relatively lower levels indicate a more stable environment with a reduced likelihood of large-scale liquidations.
this decline can be viewed as a positive sign in the medium term, as reduced leverage often prepares the market for healthier price action driven by genuine spot demand rather than derivatives-driven impulses. Furthermore, the combination of this low reading and relative price stability may suggest that the market is undergoing a consolidation or repositioning phase in preparation for a more pronounced subsequent move.
Written by Arab Chain
