AI tokens are heating up! Story’s [IP] 25% pump is just the start IF…
- Ethereum’s rebound above $2,670 triggered a massive short squeeze, liquidating $500 million in shorts
- Rising ETH inflows to derivatives and positive funding rates suggest more volatility may be ahead
Ethereum [ETH] just reminded traders what a short squeeze feels like.
After clawing its way back above $2,670, the sudden rebound wiped out over half a billion dollars in short positions on Binance alone, marking one of the largest liquidations the market has seen in recent times.
And now, with fresh ETH flowing into derivative exchanges, the setup looks primed for more.
Ethereum: What triggered the squeeze?
Ethereum’s rally above $2,670 caught leveraged short traders off guard, setting off one of the largest liquidation waves in recent months.
CryptoQuant data shows a dramatic $500 million delta in short liquidations on Binance – a clear sign of overcrowded bearish bets.
Source: CryptoQuant
Expecting further downside, traders aggressively entered short positions. But when ETH reversed direction, margin calls forced rapid buybacks.
These forced liquidations fueled the price rally, squeezing late shorts and swiftly shifting market sentiment.
The chain reaction pushed funding rates into positive territory, highlighting the sharp unwinding of bearish leverage.
Numbers point to mounting short-selling pressure
Following the short squeeze, Ethereum is seeing a sharp uptick in deposits to derivative exchanges, many of them exceeding 30,000 ETH per transaction, as shown in the chart.
Source: CryptoQuant
The rise that began around June 13 signals swift trader repositioning. While some may be hedging spot exposure post-squeeze, the scale and timing of inflows point to increasing short-selling interest.
If Ethereum’s price loses momentum, these inflows could lead to renewed bearish leverage, raising the risk of another sharp unwind.
In short, more market turbulence could be on the horizon.
Funding Rates turn positive as open interest stabilizes
Ethereum’s rebound pushed Funding Rates into positive territory, signaling growing bullish sentiment despite recent market volatility.
During the rally, aggregate open interest spiked but fell sharply amid liquidations, then stabilized near $15.4 billion.
The rise in Funding Rates indicates that long positions are once again paying to remain open.
Source: Coinalyze
Traders are leaning bullish in the short term, but with cautious positioning. If open interest builds again without price movement, it could reignite volatility. This is with rising leverage and elevated derivative inflows still in play.
