Soaring Ethereum Pushes Past Short Sellers, Causing Heavy Losses
In a dramatic turn of events, Ethereum (ETH) has experienced a significant price rally in mid-2025, with billions in short liquidations and a steep price increase. The surge is primarily attributed to an intense short squeeze, where a large number of traders holding short positions were forced to close them as the price of ETH rose sharply.
The catalyst for this trend was excessive short exposure, with Ethereum reaching record levels of net short positions, about 25% higher than its previous peak in early 2025. When ETH's price started to climb, these short sellers were squeezed, triggering forced liquidations that further accelerated the price surge.
Some traders, including large whales, took on highly leveraged short contracts, such as those with up to 18x leverage. For instance, one whale faced over $3.5 million in unrealized losses as ETH approached $3,321. If the price passes this level, forced liquidation of this position could occur, adding more upward pressure on the price.
The rally was also fueled by new inflows from major institutional players like BlackRock and funds linked to former President Trump, which have been buying ETH aggressively. Additionally, regulatory reforms and the prospect of massive retirement fund allocations to crypto have increased demand for ETH.
The sharp price rise coincided with increased buy-side taker volume on major exchanges like Binance, indicating growing bullish sentiment and trading activity. This has further intensified volatility and sustained the rally, squeezing shorts remaining on the market.
However, following the liquidation of many short contracts during the rally, there are now fewer shorts left to liquidate, which could lead to a period where ETH price stabilizes or even dips to trigger long liquidation. Nevertheless, the immediate past trend was clearly dominated by a powerful short squeeze.
Interestingly, Ethereum is the only top 10 asset (excluding stablecoins) with rising futures volume over the past 24 hours. Ethereum traders are experiencing more liquidations than Bitcoin traders, with $34 million worth of Bitcoin liquidated shorts in the past day. The Crypto GENIUS Act, Clairty Act, and Anti-CBDC Act failed and then passed in a dramatic standoff on the House floor, which may have influenced the market sentiment.
The price of Ethereum has risen nearly 9% over the past 24 hours to over $3,330. Ethereum trading volume jumped 15% to $132 billion in the past day, outpacing Bitcoin's trading volume, which stood at $109 billion. Open interest in Ethereum futures is up 6%, and Ethereum futures volume grew 27% in the past day.
Patrick Gruhn, founder of crypto derivatives platform Perpetuals.com, stated that the ETH price has been sensitive and unpredictable due to recent regulatory news. Maelstrom Fund, Arthur Hayes' venture capital firm, plans to buy "best in class for every DeFi vertical" if ETH continues outperforming. Neutral funding in Ethereum futures suggests fresh positioning but without signs of excessive leverage.
In April to June, Ethereum funding was negative, indicating that most of the interest was short interest. However, recent developments suggest a shift in market sentiment towards a more bullish outlook for Ethereum. As the market continues to evolve, it will be interesting to see how these trends unfold in the coming months.
- The surge in Ethereum's price in mid-2025 was primarily due to a short squeeze, where traders with short positions were forced to close them as the price of ETH rose sharply.
- Excessive short exposure led to record levels of net short positions for Ethereum, about 25% higher than its previous peak in early 2025.
- Large institutional players like BlackRock and funds linked to former President Trump have been buying Ethereum aggressively, contributing to the price rally.
- The sharp price rise in Ethereum was accompanied by increased buy-side taker volume on exchanges like Binance, indicating growing bullish sentiment and trading activity.
- Following the liquidation of many short contracts, there are now fewer shorts left to liquidate, potentially leading to a period of price stabilization or even a dip.
- Unlike Bitcoin, Ethereum is the only top 10 asset (excluding stablecoins) with rising futures volume over the past 24 hours, suggesting a more bullish outlook for Ethereum in the coming months.
