Key takeout
Why is Ethereum’s open profit contraction important?
Ethereum’s public interest fell from $7 billion to $25 billion while leverage was rising and vulnerability increased.
What does the on-chain signal indicate ETH?
The flow from stocks above 40, the MVRV Z score cooled to 0.798, and the funding rate remains positive, suggesting a bullish bias, but increased the risk of volatility.
Ethereum [ETH] Open Interest (OI) fell by about $7 billion in two weeks from $32 billion to $25 billion. Meanwhile, the estimated leverage ratio rose sharply to the level it last saw in June.
This difference showed a higher speculative risk as traders leaned towards leverage despite fewer participants. However, OI drops can mean weaker moves.
This made the rest of the position more concentrated and more sensitive to swing.
Ethereum’s S2F ratio shows an increase in volatility
Ethereum’s inventory-to-flow ratio skyrocketed above 40 at press after a sharp day-to-day movement. In fact, the series showed extreme volatility until September.
Rising values reflect stronger rarity signals in the current market cycle, and are often associated with increased speculation. However, the pronounced volatility of this metric indicates an unstable demand for ETH supply flows.
Such a wide swing undermines reliability as a sustained bull signal.
As a result, traders may interpret instability as a warning that speculative demands are inconsistent, and Ethereum is exposed to rapid emotional changes. Spike is optimistic, but takes a hidden risk.
Source: Santiment
MVRV reflects the profitability of cooling
Ethereum’s MVRV Z score has receved after reaching a higher level at the beginning of the quarter. At 0.708 it was close to neutral territory and still exceeded zero.
This moderation indicates that profitability between ETH owners is cooled down and reduces immediate pressure to make a profit.
However, the positive zone indicates that the holder is still profitable.
Source: Santiment
Funding rates indicate bullish trader positioning
The funding rate remained positive, at around 0.004% at major venues.
Traders paid premiums to maintain their long standing, reinforcing the market narrative driven by optimism. Sustained positive funding usually reflects confidence in additional benefits, but risks can also be introduced in the event of over-leverage.
In contrast, falling suggested bullish exposure with less hand filled. That setup can amplify volatility when momentum changes.
Source: Santiment
Can Ethereum’s bullish bias withstand the growing leverage risk?
Ethereum’s market structure revealed a mixed signal. Open interest declined while leverage increased, rarity metrics fluctuated, profitability cooled, and funding rates remained bullish.
These dynamics suggest that optimism persists, but there is an increased underlying risk. High leverage and unstable on-chain ratios indicate vulnerability despite traders continuing to wager further upwards.
Whether Ethereum maintains bullish bias depends on how long it can hold positive funds and profitability before volatility causes corrections.