Ethereum shorts jump 13,000% – Is ETH laying out a $3K bear trap?

Ethereum [ETH] is on track for its best September in a decade. Specifically, ETH is up 7% for the month, which would make it the best September since 2016 and only the fourth positive September in the past decade.

With just over two days left, ETH has a real shot at locking in a major monthly performance.

With that being said, Ethereum’s short positioning appears to be extremely bullish at the moment. According to the chart below, ETH short positions have surged by roughly 13,000% in the past two weeks, rising from just over 771 ETH to over 101,000 ETH.

That’s an extreme buildup of bearish bets. If ETH starts pushing higher, this crowded short positioning could quickly turn into fuel for a sharp short squeeze. 

To  see whether this squeeze could happen, it’s important to see what’s driving this bearish positioning.

Technically, ETH is pressured by the big supply wall between $2,722 and $2,822, where more than 13.3 million ETH have changed hands.

Moreover, ETH declined by about 1.5% this week after the breakout above $2.8k last week, which suggests that selling pressure is clearly intensifying. In this case, the rising shorts indicate traders are betting on ETH’s inability to surpass this resistance. 

But what if ETH breaks through $2.8k? If bulls step in, this massive buildup of shorts could turn into a perfect bear trap. Short sellers may then be forced to cover, adding more buying pressure and potentially giving Ethereum the momentum to push toward $3k.

On-chain signals strengthen Ethereum’s bear trap setup

Ethereum’s post-Hegotá upgrade might just be one piece of the puzzle.

In his latest tweet on X, Vitalik Buterin outlined Ethereum’s transition to a more general blockchain architecture and an upgrade to make the blockchain more scalable, secure, and private.

Such a roadmap may come at the most needed time, given the ongoing large-scale accumulation of ETH by on-chain whales.

According to on-chain analytics, the number of ETH accumulated by whales is up 21.4% within the last seven days and reached 321k ETH as of now. At the price of $2.7 million, the total value of the accumulation sums up to $864 million.

But whale buying is not the only sign pointing to a growing demand for Ethereum.

As can be seen in the chart above, staked ETH has hit a new all-time high of 43.5 million ETH, or over 35.6% of the total supply.

In addition to that, there has been an influx of more than 500,000 ETH into staking in the past week alone, meaning ETH is actively being locked away instead of being used for trading.

Together, the rise in both whale accumulation and record-breaking staking activity is a sign that investors are buying into ETH for the long term.

Against this backdrop, the post-Hegotá upgrade could become another catalyst to keep this momentum going.

Thus, the 13,000% increase in short positions becomes more interesting. While traders are buying bearish bets, whales acquire more ETH that is staked.

If bulls penetrate key resistances, this crowded positioning will lead to a bear trap that forces shorts to cover and provides the fuel for ETH to reach $3k in October.

Final Summary