Ethereum traders appear to be FOMO-trading at extremes, creating a predictable pattern where local price tops and bottoms coincide with extreme funding rates, according to analytics firm Santiment’s Thursday tweet.

The data reveal a clear cycle.

In early September, the aggregated funding rate entered negative territory, marking a local bottom. Liquidations were initially dominated by longs as Ethereum dropped from $4,900 to $4,500, according to CoinGlass data.

By September 12, Ethereum climbed 11.5% to $4,700, liquidating short sellers, pushing funding rates deeper into positive territory, and marking a local top. The same pattern persists weeks later, according to Santiment analysts, as funding rates slip into negative territory following Ethereum’s dip to $3,800 on October 30, liquidating roughly $954 million in longs.

“These swings in funding rates are fueling emotional, short-term trading, especially as traders tend to go more aggressively long during minor rallies or short during brief pullbacks,” Illia Otychenko, Lead Analyst at CEX.IO, told Decrypt.

As a result of this feedback loop, volatility is amplified, making it harder to see the market’s real direction, Otychenko added. “Traders are reacting to each other’s leverage instead of genuine buying or selling demand, which adds instability to the market.”

In addition, the analyst believes Ethereum’s derivatives market is showing signs of stress, with open interest rising despite the price’s descent.

“This setup typically hints that leverage is sustaining the market more than genuine buying demand,” Otychenko explained.

Based on his observations, investors are trying to buy the dip, “which leaves the market exposed to sharp drops if momentum fails to shift.”

In the short term, Otychenko expects Ethereum to remain range-bound with a bearish bias unless funding and positioning reset. “Breaking this cycle will likely require increased spot demand rather than another leverage-led push.”

In the medium term, the crypto markets are likely to be volatile, reacting to geopolitical and macroeconomic policy shifts. Over the long run, however, analysts remain bullish amid an improving macro backdrop that includes the Fed’s easing cycle, as Decrypt previously reported.

On prediction market Myriad, launched by Decrypt‘s parent company Dastan, users remain cautiously optimistic on Ethereum, placing a 61% chance on its next move taking it to $4,500 rather than $3,100.

Ethereum is down 1.5% over the past 24 hours and is currently trading at $3,834, recovering from an intraday low of $3,687, according to CoinGecko data.