Ethereum fell 13.8% over three days and retested the $2,900 support on Wednesday, marking the first time in four weeks. This drop followed broad market weakness as traders reduced risk exposure amid worsening socio-economic conditions.
Although ETH briefly reclaimed $3,000 after US President Donald Trump paused proposed import tariff hikes on several European Union countries, liquidation pressure remained heavy. Roughly $480 million in bullish leveraged positions closed within two days.
Against this backdrop, derivatives data from the Laevitas platform revealed rapid shifts in Ethereum futures positioning between January 15 and January 22, aligning closely with price movements.
In the beginning, the ETH volume-weighted funding was positive and ranged between 3% and 7% APR. This indicated that the long positions were the most influential in the perpetual futures markets.
ETH was then at $3,300-$3,400, according to the market data, which also indicated that bulls were still using high leverage. Long position traders were paying high prices to keep their upward exposure. A little bit later, around January 18 and January 19, the momentum started to weaken.
The funding rates went back closer to zero and in the end turned negative for a short time, which could be interpreted as the buyers' exhaustion as the price broke below the $3,200 mark.
Selling pressure intensified on January 20 and January 21. Volume-weighted funding dropped deeper into negative territory, reaching near -5% APR at its lowest point. This funding collapse coincided with ETH falling toward $2,900. The move marked the lowest price level shown on the charts during the period.
The alignment between negative funding and falling price pointed to aggressive deleveraging. Long positions unwound rapidly as downside momentum built across derivatives markets.
The open interest-weighted funding chart reflected the same pattern. Earlier this week, OI-weighted funding ranged between 4% and 8% APR, showing long exposure among larger traders. As price weakness spread, OI-weighted funding also slipped below zero. This shift showed bearish positioning expanding even among high-conviction participants.
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By January 22, both funding measures recovered above zero as ETH rebounded toward $3,000 to $3,100. Still, rates remained below earlier highs, suggesting limited risk appetite. Institutional concerns added pressure. US-listed Ether spot ETFs saw $230 million in net outflows on Friday, reversing the prior week’s average inflows of $96 million.
These ETFs hold over $17 billion worth of ETH, creating a notable supply overhang. Meanwhile, ETH-focused treasury firms such as Bitmine Immersion and Sharplink reported heavy accounting losses. To gauge professional sentiment, traders also monitored ETH options skew. The metric rose to an 11% downside premium, the highest level in seven weeks.
When downside protection trades at such a premium, what does it signal about market confidence after repeated rejections near $3,400 over the past ten weeks?