Ethereum rises 25% as record $3 billion short liquidations boost price

Institutional activity and short squeeze drive momentum

Ethereum’s latest surge follows a major rally in Bitcoin, which gained 21% in recent days and reached the $75,000 threshold. This uptrend in major cryptocurrencies is fueling renewed optimism among traders and investors.

A record short squeeze played a significant role in this trend. On Wednesday, the cryptocurrency market saw nearly $3 billion in short liquidations, representing the largest forced closure of bearish positions to date. Ethereum accounted for about 40% of these liquidations, equaling roughly $1.2 billion in closed short positions, which added upward pressure to ETH’s price as bearish traders rushed to exit their trades.

According to CoinGlass, open interest in Ethereum futures rose by 5% to $31.67 billion on Friday, showing that traders are quickly re-engaging with the market following the liquidation event.

Open interest climbed by 5% to $31.67 billion, reflecting renewed confidence among traders as Ethereum’s rally accelerated following the record short squeeze.

Funding rates for Ethereum also soared to 0.081% on Friday, their highest level since late May. Positive funding rates mean traders holding long positions are paying a premium to those with short positions, a dynamic that often points to increased demand for exposure to price gains.

Higher funding rates may also signal increasingly crowded long positions, introducing the risk of another rapid market reversal if a pullback emerges.

Institutional demand is adding to Ethereum’s momentum as well. Net inflows to US spot Ethereum exchange-traded funds reached $219.50 million on Thursday, the largest single-day inflow since October. Analysts view this spike as a sign that institutional buyers are actively participating in the current market recovery.

If ETF inflows and constructive derivatives activity continue, analysts believe there could be further room for upside.

Mini dictionary: Short squeeze, a market event in which a rapid price increase forces traders with short positions to buy back assets to cover their losses, often accelerating the asset’s upward momentum.

Technical outlook and key resistance levels

Ethereum’s price action remains bullish after moving above its major exponential moving averages. The 200-day EMA stands at $2,177, while the 50-day, 100-day, and 20-day EMAs are positioned at $1,961, $1,932, and $1,902, respectively. ETH’s ability to hold above these levels signals a recovery of important trend indicators.

The immediate resistance sits at $2,431. Traders are watching for a sustained breakout above this level, which could pave the way for further increases.

However, technical indicators now point to potentially overheated conditions. The 14-day relative strength index (RSI) reached 85, and the stochastic oscillator climbed to nearly 92, both of which are considered overbought territories. These readings suggest that a period of sideways movement or a short-term correction could occur.

Should Ethereum decline, initial support is expected around the 200-day EMA at $2,177 and nearby horizontal support at $2,172. Additional downside support includes the 50-day EMA at $1,961, the 100-day EMA at $1,932, and the 20-day EMA at $1,902. More substantial support lies at $1,809, $1,701, and $1,507.

Traders and investors will likely monitor these levels closely to gauge the sustainability of Ethereum’s recent rally and any potential changes in market sentiment.