Isabella García
Rising leverage in Bitcoin and a significant rotation into Ethereum highlight potential risks and shifting dynamics in the cryptocurrency market.
Bitcoin’s notional open interest in perpetual futures has climbed to over 310,000 BTC ($34 billion), marking a two-year high. This represents an increase of 41,607 BTC over the past two months, with 13,472 BTC added over a single weekend, signaling aggressive long positioning amid stagnant prices. Annualized funding rates have also jumped from 3% to nearly 11%, raising the risk of short-term long-side liquidations.
Market analysts note that this leverage spike resembles similar patterns observed in the summers of 2023 and 2024, both of which ended in sharp liquidation events. However, the later timing of this peak suggests a more extended consolidation period, potentially catching new buyers off guard. Conservative positioning may be prudent until excess leverage is cleared.
Massive Bitcoin Rotation Fuels Ethereum Rally
Adding to market volatility, a long-term holder rotated 22,400 BTC into ETH via a decentralized exchange, pushing ETH to a new all-time high of $4,956 over the weekend. This ended a 1,380-day drawdown and shifted market momentum in favor of ETH.
The ETH/BTC ratio also surpassed 0.04 for the first time in 2025, reflecting ETH’s relative strength. Despite this USD rally, ETH’s longer-term performance against Bitcoin remains weak, with 1-, 2-, and 3-year rolling returns still negative. Historically, ETH reaching new highs has coincided with broader crypto peaks, as seen in 2017 and 2021, when altcoins surged while BTC stagnated.
BTC Dominance and Institutional Trends
Bitcoin dominance remains elevated at 58.6%, compared to sub-40% levels during previous peaks, suggesting that broad altcoin froth is not yet a concern.
Institutional flows indicate cautious sentiment. CME traders have reduced BTC exposure, while options markets show defensive positioning with longer-dated skews turning positive for the first time since 2023. Meanwhile, ETH futures trade at a double-digit premium and have outperformed Bitcoin since early August, driven by ETF inflows and corporate treasury purchases.
Outlook
As ETH’s relative strength grows, traders are closely watching whether this cycle will mirror historical patterns or diverge. The combination of Bitcoin leverage risk and major ETH rotations underscores a period of heightened volatility and shifting market dynamics in the cryptocurrency space.
