Ethereum Rally: Why Funding Rates Still Look Healthy

[Chawla Solutions]

Ethereum (ETH) has rallied to above $3,700, sparking concerns about whether the move is overheated. But one key metric suggests otherwise: funding rates across exchanges remain relatively subdued.

As shown in the chart, the last two major spikes in Ethereum's perpetual funding rates—March and November 2024—were followed by sharp price corrections. During those times, funding rates surged above 0.10, a clear sign that long positions were overcrowded and leveraged traders were chasing the pump.

Currently, despite ETH’s impressive move, funding rates are only slightly above baseline (see yellow circle). This implies that the current rally is still organic, not driven by extreme leverage or speculation. In fact, this moderate funding environment is typically bullish, as it signals room for further upside before sentiment becomes overheated.

Additionally, Ethereum has reclaimed key resistance levels without triggering unsustainable FOMO. While a short-term correction is always possible after a sharp move, the historical context suggests any dip would likely be shallow and quickly absorbed by buyers.

In summary, ETH’s upward move looks healthier than previous rallies. The lack of excessive leverage suggests that institutional demand and spot accumulation may be driving the price, not just frothy derivatives.

Outlook:
As long as funding rates remain modest and ETH holds above $3,500, the path of least resistance appears to be upward. Traders should stay cautious of spikes in funding rates, but for now, Ethereum looks technically and structurally sound.