Demand for Ether leverage sharply increased in the past 24 hours, but data does not point to liquidations being the main driver for the price correction.
Ether (ETH) price gained 14% between Feb. 26 and Feb. 28, reaching the highest level in almost two years at $3,484, but the movement coincided with a surge in the cost for bullish leverage positions, which is somewhat concerning. Given that Ether experienced a flash crash down to $3,180 on Feb. 28, some investors believe that excessive optimism driven by fear of mis FOMO has increased the risk of cascading liquidations.
Firstly, one needs to note that some traders might need temporary leverage while they raise cash, either by selling other assets or waiting for deposits to kick in. Such movements are common in the heat of the market, even for professional arbitrage desks, and cause the funding rate to soar, which can last for a couple of days or even weeks.
Some analysts argue that the reason behind investors' increased optimism toward Ether’s price is the upcoming Dencun hard fork, scheduled for March 13. The upgrade introduces several improvements, including proto-danksharding, which aims to reduce layer-2 transaction fees. The expected upgrade would greatly reduce the data registry cost for Ethereum network's preferred scaling solution, rollups.
