The Alchemist 9
Ethereum Sentiment Reset: Are We Near a Leverage Bottom?
This setup combines three key metrics: Coinbase Premium Index, Funding Rates, and Open Interest. Together, they reveal a clear shift in market structure from overheated conditions to a potential reset phase. What the metrics show Coinbase Premium Index: During the rally phase, the premium stayed consistently positive, signaling strong spot demand from Coinbase, typically associated with US institutional flows. However, in the recent downtrend, the premium turned deeply negative and remained there for an extended period. This reflects weakening spot demand and a shift toward risk-off behavior. Funding Rates: Funding stayed mostly positive during the uptrend, confirming that long positions dominated the market. As price declined, funding turned sharply negative multiple times, indicating aggressive long liquidations and increasing short positioning. These negative spikes often align with local capitulation events. Open Interest: Open Interest expanded significantly during the rally, showing increasing leverage participation. However, it dropped sharply during the sell-off, indicating forced liquidations and position closures. Recently, Open Interest has started to recover, suggesting new positioning is building again. Correlation Insight Positive premium + rising OI + positive funding = strong trend continuation Negative premium + falling OI + negative funding = liquidation phase Recovering OI + stabilizing funding + less negative premium = early rebuild phase Currently, the market appears to be transitioning from liquidation into a rebuilding phase. However, spot demand (premium) has not fully recovered yet, which introduces uncertainty.