Key Points:
Ethereum's perpetual contract distortion is fading, with monthly futures showing neutral conditions and reduced short-term market fear.
The options market shows a balance of demand between bullish and bearish strategies, reflecting a healthy derivatives market.
Ethereum outperformed most altcoins during the crash and the subsequent 48 hours, reinforcing its relative strength and bullish momentum.
According to market data, Ethereum's price returned to the $4,100 level on Sunday, partially alleviating the pressure from last Friday's 20.7% sharp drop. Market data indicates that the $3.82 billion leveraged long liquidation had a profound impact on the Ethereum derivatives market. However, four factors suggest that Ethereum's rebound from the $3,750 support level may have ended this round of short-term adjustment.
The funding rate for Ethereum perpetual contracts once plummeted to -14%, meaning that short (bearish) traders had to pay funding to maintain their positions. This state is difficult to sustain for a long time and likely reflects market concerns about the solvency of some market makers and even exchanges. Regardless of whether these concerns are justified, traders typically become more cautious until confidence is fully restored.
The market remains uncertain whether exchanges will compensate customers due to cross-collateral margining and improper oracle pricing management. Binance announced that it has compensated $283 million and stated that other related cases are still under review.
Until a detailed post-analysis is released, traders will remain cautious. Wrapped tokens and synthetic stablecoins experienced the largest price decoupling, with traders' margins dropping by as much as 50% within minutes.
Ethereum's monthly futures absorbed the shock in less than two hours, quickly recovering to the minimum 5% premium required for a neutral market. Therefore, the lack of demand for leveraged long positions in perpetual contracts is more likely a reflection of weak product design rather than strong bearish sentiment.
This distortion in the derivatives market may persist until market maker confidence is restored, a process that could take weeks or even months, but should not be seen as a signal of weakening momentum for Ethereum.
The Ethereum options market on Deribit did not show signs of pressure or unusual demand for bearish strategies. Weekend trading volume remained normal, with slightly lower activity in put (sell) options compared to call (buy) options, indicating a balanced and healthy market.
This data helps alleviate concerns about a coordinated collapse in the cryptocurrency market. If traders expect a significant price drop, options trading volume could surge sharply. Therefore, regardless of what triggered the chain liquidations and instability in the Ethereum derivatives market, traders were completely caught off guard.
According to market data, more importantly, some mainstream altcoins experienced intraday declines far exceeding Ethereum's 20.7%, with SUI (SUI) dropping as much as 84%, Avalanche (AVAX) down 70%, and Cardano (ADA) falling 66%. In the past 48 hours, Ethereum dropped 5%, while most competing coins are still about 10% lower than their pre-crash lows.
Ethereum's decoupling from the broader altcoin market highlights the advantages brought by its spot ETF size of $23.5 billion and an options market open interest of $15.5 billion. Even with competitors like Solana (SOL) entering the spot ETF race, Ethereum remains the mainstream altcoin of choice for institutional funds due to its network effects and resilience during volatility.
As confidence in the derivatives structure gradually recovers, Ethereum's outlook remains strong, with the potential to further rebound to the $45,000 resistance level.
Related: Bitcoin (BTC) Core v30 officially released, OP_RETURN changes spark controversy
Original: “Ethereum (ETH) poised to reclaim $4,500 as futures markets stabilize from crypto flash crash”
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