Mission Impossible? Analysts Warn Binance Leverage Could Spark Sharp Correction

Ethereum blasted past its all-time high mark set all the way back in November 2021 after climbing to nearly $4,950 on Sunday. The leading altcoin has since experienced a minor pullback.

But traders may need to brace for turbulence as Binance’s Estimated Leverage Ratio (ELR) on ETH has surged to record highs, which indicates extreme risk-taking in the market.

Ethereum Traders on Edge

The ELR, which factors in open interest (OI), shows how heavily leveraged traders are positioned. Open interest on Binance hit a new all-time high of $12.6 billion on August 22, as the derivatives market became crowded. For context, Binance’s ELR stood at just 0.09 in July 2020 compared to today’s high of 0.53.

CryptoQuant explained that such excessive leverage often precedes volatility, as markets tend to punish overextended traders through sudden liquidations. While institutional and whale accumulation support ETH’s broader bullish outlook, Binance’s dominance in trading activity makes its derivatives market an important driver of near-term price swings.

With ETH recently breaking past its all-time high, this overheated leverage could spark a sharp deleveraging event, temporarily dragging prices lower before any attempt to test the $5,000 mark.

ETH Support Builds

Ethereum’s price has found strong support from Binance whales, who have steadily ramped up their exposure since July. As recently reported by CryptoPotato, these large players have been actively accumulating the token through both spot and futures orders as the asset approaches the $5,000 level.

Unlike retail traders, who tend to move earlier in anticipation of price swings, whales generally wait for confirmation before entering, which explains why their buying activity accelerated only after Ethereum reversed upward.

While this strategy sometimes exposes them to the risk of entering late or facing sudden pullbacks, their continued accumulation nonetheless points to growing conviction in the altcoin’s trajectory.

Meanwhile, institutional appetite remains intact as US spot Ethereum ETFs opened the week with a strong rebound, recording 16,900 ETH in fresh inflows yesterday. This positive shift comes after last week’s setback, when the multi-week streak of inflows was interrupted by net outflows of 105,000 ETH.