Recently, Ethereum (ETH) experienced a significant pullback after attempting to break through the $3800 mark, with intraday volatility exceeding 10% at one point, abruptly breaking the consolidation trend. The rising expectations surrounding the approval of spot ETFs and the synchronized reallocation of funds in both on-chain and derivatives markets have become the main catalysts for this round of volatility. The increase in implied volatility of options and rapid expansion of Gamma exposure transformed the originally mild upward trend into short-term high-frequency fluctuations.

Catalysts and Fund Flow Breakdown

● News:

- Rising Expectations for Spot ETFs: Recently, several institutions have revised their judgments on the probability of ETH spot ETF approval, increasing it from less than 20% to nearly 50%–60%, becoming a direct trigger for the acceleration of the market.
- Marginal Improvement in Regulatory Stance: The U.S. regulatory stance towards mainstream public chain assets has softened compared to earlier, with no new signals of repression being released, providing space for risk appetite recovery.
- Continued Expectations for Technical Upgrades: Discussions around Ethereum's subsequent performance optimization and Rollup ecosystem expansion have reignited, with the market viewing it as a logical anchor point for medium to long-term valuation repricing, although the specific timing remains uncertain.

● Fund Flow:

- On-chain Funds Flowing Back to the ETH Ecosystem: Research Brief shows that the total locked value on the ETH mainnet and layer two networks has recently climbed back to around $80 billion, an increase of over 30% from the beginning of the year, with interest-bearing assets represented by LSD and LRT protocols contributing the majority of the increment.
- Synchronized Volume Growth in Spot and Derivatives: Daily trading volume of ETH spot on major exchanges once exceeded $15 billion, an increase of about 70% from the previous week; during the same period, perpetual contracts and open interest (OI) in futures rapidly climbed to high levels, indicating a concentrated influx of leveraged funds.
- Institutional Structural Positioning: On-chain data from marked wallets and custody addresses show that some institutional addresses have been gradually increasing their holdings in the $3000–$3400 range, while there are clear signs of phased reduction as prices approached $3800, reflecting a "profit-taking above, accumulation below" trading strategy.

● Sentiment:

- FOMO Sentiment Erupts: The mention of keywords like "ETH ETF" and "new highs imminent" on social platforms has more than doubled within a week, with narrative intensity significantly surpassing that of Bitcoin during the same period, indicating a notable increase in retail investors' willingness to chase prices.
- Increase in Implied Volatility of Options: The 30-day implied volatility of near-month ETH options has risen from about 45% to around 70%, with a clear tilt in trading volume and open interest towards short-term call options, reflecting concentrated bets on rapid price increases.
- Rapid Reversal After Sentiment Extremes: After the price failed to effectively hold above $3800 and experienced a sharp pullback, panic selling and passive deleveraging occurred simultaneously, causing social sentiment indicators to drop from "extreme greed" to a neutral and cautious range, leading to a phase correction of optimistic expectations.

Macroeconomic and On-chain Deep Logic

The recent sharp volatility of ETH is not an isolated event but resonates with changes in the macro liquidity environment, regulatory expectations, and the structural evolution within Ethereum. As global interest rate peak expectations strengthen and the market re-evaluates risk asset Beta, ETH, with its multiple narratives of "ETF expectations + technical upgrades + DeFi underlying assets," has become the core target for concentrated capital speculation. On one hand, as a major collateral asset for layer two networks and LSD/LRT protocols, the growth in its locked and staked volumes has built a medium to long-term support resembling "structural supply reduction" on-chain; on the other hand, the high staking ratio has also increased the sensitivity of the circulating supply to marginal selling pressure, making it easier for prices to be driven into overshooting when options Gamma exposure and leveraged longs concentrate near key price levels. On the macro level, the short-term pullback of the U.S. dollar index and Treasury yields provides a window for risk assets, while the marginal easing of regulatory winds compresses the ammunition for systemic bearishness, jointly catalyzing ETH's volume breakout and subsequent sharp fluctuations within a specific time window.

Bullish and Bearish Divergence and Key Battlegrounds

● Bulls:

- Believe that this round of pullback is a technical digestion following a rapid rise, with the trading range in the $3000–$3200 area forming a new accumulation zone, raising long-term support.
- Emphasize that the total amount of staked ETH on-chain has exceeded 20% of total supply, combined with the continuous expansion of LSD, LRT, and layer two applications, real freely circulating tokens are being continuously locked, reducing medium to long-term supply pressure.
- Bullish funds expect that once the spot ETF is approved and net subscriptions begin, it will bring a combination of "passive buying + structural capital allocation" similar to the early days of the Bitcoin ETF, and the current price has not fully reflected this potential inflow scale.

● Bears:

- Worry that the current valuation has already overdrawn the positive expectations of the ETF and technical upgrades in the short term, with the leverage accumulation in the spot and derivatives markets amplifying systemic deleveraging risks.
- Point out that the funding rate for perpetual contracts remains at a high positive premium, with one-sided longs occupying too much risk budget, which could trigger a chain liquidation if the ETF approval results fall short of expectations.
- Believe that although the macro environment has marginally improved, it has not yet entered a phase of significantly declining risk-free rates and comprehensive liquidity easing; if the dollar and Treasury yields rise again, it will inversely suppress the valuations of high Beta assets.

Key Levels and Future Market Observation Indicators

In the short term, the market needs to focus on the support strength in the $3200–$3300 region and the pressure situation around $3800, as this range will become the core battleground for the next phase of bullish and bearish speculation. If ETH can complete high-level trading above $3200 and maintain moderate growth in on-chain activity and locked volumes under the premise of manageable macro risks and no significant reversal in ETF expectations, then the mid-term structure may evolve into a "re-acceleration platform for upward oscillation." Conversely, if regulatory expectations significantly cool or macro bearishness is concentratedly released, leading to net reductions in on-chain staking and rapid deleveraging in derivatives, caution should be exercised regarding price pullbacks seeking deeper support in previous accumulation zones. In this process, the approval process for spot ETFs, changes in implied volatility of options, and marginal changes in funding rates will be key high-frequency signals for judging sentiment turning points and trend continuations.

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