Ethereum’s derivatives market is raising alarm bells, as Binance data indicates that the estimated leverage ratio (ELR) for Ethereum reached a record 0.5617 on November 19, while the spot price lingered around $3,000.

Experts warn that this elevated leverage coupled with a flat trading price could lead to drastic market changes in either direction.

Record High Leverage Amid Flat Prices

Analytics platform Arab Chain reports that the historically high ELR suggests a congested derivatives market. What’s concerning is this spike occurs during a period of low volatility, with ETH’s price fluctuating between $3,000 and $3,160.

Traders are significantly increasing leverage to establish long and short positions despite a lack of strong price trends.

The report stresses that a slight price movement could incite automatic liquidations, compelling traders to either sell or buy back, which could drastically alter ETH prices.

“This disconnect between relative price stability and the sharp rise in leverage suggests that the market is building internal pressure that could turn into a violent move in either direction,” noted Arab Chain.

Historically, such leverage spikes are often followed by major price reversals, suggesting heightened volatility is likely in the near future.

On-chain data indicates a stagnant influx of new retail investors, as found in a CryptoQuant analysis, showing user deposits on the Ethereum network remained flat even during its rise towards $5,000 earlier this year.

Retail Caution Amid Testing Market Conditions

While ETH may appear stable at around $3,100, it has nosedived nearly 13% over the past week and 24% in the last month. Notably, it remains 38% below its August 2025 peak of approximately $4,950.

Analysts believe that current liquidity levels are resetting, a historical precursor to market recoveries following periods of inactivity. Additionally, limited retail participation in the market mirrors past trends preceding significant upswings.

Observations by analysts such as CrediBULL Crypto suggest that Ethereum could surpass Bitcoin towards new all-time highs as market liquidity improves, highlighting potential for growth in the ETH/BTC pairing.