Ethereum (ETH) has just issued a signal reminding traders about a Short squeeze.
After surpassing the $2,670 level, the sudden rebound wiped out over half a billion USD in Short positions alone on Binance, marking one of the largest liquidations the market has seen in recent times.
And currently, with new ETH flowing into derivatives exchanges, the situation seems ready for more liquidations.
What triggered the Short squeeze?
Ethereum's price surge above $2,670 has unexpectedly caught Short traders with leverage, causing one of the largest liquidations in recent months.
CryptoQuant data shows a $500 million gap in Short liquidations on Binance, a clear sign of excessive bearish bets.
Predicting further price declines, traders have actively engaged in Short positions. But when ETH reverses direction, these positions fall into forced liquidation.
These forced liquidations have fueled the price surge, forming a Short squeeze with late entries and rapidly changing market sentiment.
The chain reaction pushed the funding rate into positive territory, highlighting the strong reversal of bearish leverage.
The numbers indicate increased short-selling pressure.
After forming a Short squeeze, Ethereum is witnessing a significant influx of deposits into derivatives exchanges, with many exceeding 30,000 ETH per transaction, as shown in the chart.
The increase began around June 13, signaling the rapid position changes of traders. Although some may be hedging spot risks after facing the Short squeeze, the scale and timing of the inflow suggest that short sellers are increasing.
If Ethereum's price loses momentum, the inflow of funds could lead to new bearish leverage, increasing the risk of a reversal once again. In summary, the market may become more chaotic.
The funding rate turned positive as open interest stabilized.
Ethereum's recovery has pushed the funding rate into positive territory, signaling bullish sentiment despite the recent market volatility.
During the uptrend, the total open interest surged but then dropped sharply amid liquidations, later stabilizing at around $15.4 billion.
The funding rate increase indicates that Long traders are once again paying to maintain their positions.
Traders are leaning bullish in the short term, but with a cautious stance. If open interest increases again, it could trigger volatility. This occurs when leverage increases and derivative inflows are high.
