Bitcoin traders stay cautious amid ‘disbelief’ near all-time highs while leveraged Ethereum bets surge, analysts say

Bitcoin surged back toward $110,000 this week amid a wave of short covering after last Thursday’s Trump–Musk spat sent it plunging to $100,500. Yet, even near all-time highs, BTC traders remain wary as funding rates turn negative in a sign of “disbelief.” With macro jitters rising ahead of today’s CPI data and next week’s Fed meeting, that caution might just be the setup for the next breakout, according to K33.

Bitcoin funding rates and leverage indicators across platforms point to sustained defensiveness, K33 Head of Research Vetle Lunde wrote in a Tuesday report. Binance’s BTC/USDT perpetuals averaged negative daily funding on Friday and Sunday, while weekly funding rates sat at just 1.3% annualized — levels only seen near local bottoms over the past two and a half years. Historically, bitcoin does not top during periods of negative funding; instead, such positioning often precedes further upside, he noted.

BTC/USD vs days of negative funding rates. Image: K33.

That risk-off tone extends beyond futures markets. The Volatility Shares 2x leveraged long Bitcoin exchange-traded fund, BITX, holds just 52,435 BTC in exposure — well below its December peak of 76,755 BTC. Unlike prior rallies in March and November 2024, inflows to BITX have remained flat over the past 30 days. The lack of leveraged flows, combined with soft funding, signals investor skepticism — a setup that could fuel bitcoin’s next leg higher, Lunde said.

Ethereum traders ‘thirsting for leverage’

Meanwhile, Volatility Shares’ 2x leveraged Ethereum ETF has taken a commanding role in the ETH derivatives market, accounting for an overwhelming portion of both U.S. Ethereum ETF flows and CME’s ETH open interest over the past two months, Lunde noted. Since April 8, the fund has added 305,100 ETH in exposure — more than the 295,250 ETH increase in CME ETH OI during that time — meaning that, without it, the market would’ve seen a net decline, he said. 

ETHU’s notional exposure is now equivalent to 18.3% of the ETH held by all U.S. spot Ethereum ETFs and two-thirds of CME’s ETH OI. By comparison, BITX represents just 4.3% of U.S. spot Bitcoin ETF holdings and one-third of CME’s BTC OI. It’s also the second most popular Ethereum ETF this year, trailing only BlackRock’s ETHA, with the dominance of ETHU reflecting a “thirsting for leverage” on long ETH exposure that has yet to materialize in bitcoin markets, Lunde said.

Cumulative U.S. spot ETH ETF flows. Image: K33.

That view is mirrored by Kraken Head of Derivatives Alexia Theodorou, but a double-edged sword in terms of potential price action. “Open interest in ETH perpetuals on Kraken reached an all-time high of 30,000 ETH earlier this week, signaling a notable uptick in speculative activity around the second-largest cryptocurrency by market cap,” Theodorou told The Block.

“This surge follows sustained institutional inflows into spot ETFs. While funding rates remain mildly bullish, the market has yet to form a clear directional consensus, with the long/short ratio still well below its January peak,” she said. “This suggests traders are positioning for volatility rather than expressing strong conviction on ETH’s short-term price trajectory. Encouragingly, recent signals from U.S. regulators indicating a more innovation-friendly stance toward DeFi could act as a structural tailwind for ETH in the months ahead.”

Ethereum is up 5.4% over the past week, according to The Block’s ETH price page, currently trading for around $2,766. However, it remains approximately 43% down from its all-time high.

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