Ethereum has traded in a narrow range for nearly a month, with leverage activity in the derivatives market losing steam, according to a CryptoQuant analyst.

Darkfost wrote in a CryptoQuant Quicktake on May 11 that Ether has rebounded about 33% from its February low and has since moved sideways between $2,250 and $2,450. During that rebound, open interest increased by about $4.5 billion, signaling a sharp rise in participation in the derivatives market.

On Binance, Ethereum’s estimated leverage ratio rose to 0.76 on March 16, indicating a rapid increase in leverage use on the exchange. Over the same period, however, funding rates remained mostly negative, suggesting many investors were still positioned for declines.

More recently, that setup has shifted. As Ether retested resistance at $2,450, Binance’s estimated leverage ratio dropped sharply to 0.57. At the same time, funding rates turned positive, indicating long positions had taken the upper hand.

The analyst cited two reasons for the decline in leverage. Long positions opened in anticipation of a breakout were quickly liquidated or closed during a pullback near $2,350. Short positions accumulated during the rally were also liquidated or scaled back.

A decline in leverage should not necessarily be viewed as a bearish signal. Lower leverage can help stabilize the market and may even provide a more constructive backdrop when prices are trying to break above the top of a trading range.

For a breakout to be sustained, spot demand rather than derivatives trading must take the lead, the analyst added.