Andrew Kang, co-founder of crypto VC firm Mechanism Capital, predicts Ethereum (ETH) will stay within a $2,000 to $4,000 price range due to rising leverage risk. Kang points to a significant increase in ETH leverage since the US election, warning that this unwinding will likely cause pain but not a complete collapse of the price. He emphasizes that the 'basis trade' driven by CME futures doesn't significantly impact the overall leverage. Kang's concerns are supported by historical ETH price trends, which often see pullbacks after periods of high leverage increases, resulting in liquidations. However, he also notes that Q1 is historically ETH's strongest performing quarter, suggesting potential for significant gains in early 2025.
Andrew Kang, Co-Founder of crypto VC firm Mechanism Capital, projected ETH could remain range-bound due to this leverage risk. He
“$ETH has added $10b+ in leverage since the election. This unwind will be painful, but $ETH won’t go to zero. It will simply range from $2k to $4k for a very long time”Before the US elections, ETH leverage stood at $9B. It shot up to over $19B in December.Kang added that the ETH ‘basis trade’ driven by CME Futures had little impact on the massive leverage since it was ‘delta-neutral’—every ETH bought in the spot market is shorted in the Futures market.
In fact, on the 20th of December, ETH recorded over $300M of liquidations, and long positions dominated the losses. That said, Coinglass data revealed that Q1 has always been ETH’s strongest performer, with an average of 81% gain. Out of the past seven years, ETH closed only two quarters in the red. Simply put, if historical trends repeat, ETH could record significant gains in Q1 2025.Benjamin is a Telecommunication Engineering graduate who is passionate about crypto-markets and unraveling market trends. Armed with charts and patterns, he's interested in making the intricate, complex landscape of digital assets more palatable for every user.Subscribe to get it daily in your inbox.
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