Original source: The Kobeissi Letter
Ethereum is making history:
We are witnessing one of the largest short squeezes in cryptocurrency history. Since July 1, Ethereum's market cap has surged by $150 billion—just days ago, net short positions had just hit a historical high.
What exactly happened? This article interprets it for you.
Please see the chart below:
According to Zerohedge data, as July began, Ethereum's net leveraged short position reached a historical peak. In fact, the net short exposure is about 25% higher than the level in February 2025. This directly led to Ethereum skyrocketing by 70% in less than a month.
But the story is far from over.
President Trump's World Liberty Financial has been increasing its Ethereum holdings. The latest transaction record shows that just 24 hours ago, the institution completed a purchase of $5 million. This added fuel to the already fierce short squeeze.
It is worth noting that many of these short positions come from institutional capital.
More intriguingly:
A Zerohedge report shows that in the 30 days leading up to July 1, BlackRock ETFs have increased their Ethereum holdings for 29 days. But as mentioned earlier, due to the sudden surge in leveraged short positions, prices have continued to decline. Clearly, some 'smart money' anticipated this storm.
We are now witnessing: billions of dollars in short positions being liquidated in succession. If Ethereum rises another 10%, another $1 billion in short positions will be liquidated.
Moreover, as these short positions are mostly leveraged, the market is facing stronger short squeeze pressure.
Ethereum could soon hit $4,000.
We have also observed a similar effect on Ripple, while Bitcoin continues to show relative strength. Bitcoin has officially returned to the $120,000 mark, with a market cap increase of $900 billion since the low in April. After months of stagnation, Ethereum and Ripple have finally begun to catch up to Bitcoin's gains.
We anticipated this trend early. Here are some warning signals we provided to our premium members: we gradually bottomed out at $80,000, $90,000, and $100,000, accurately predicting a target of $115,000. Last week we raised the target to $120,000+, and this target has just been achieved.
More importantly, the market is digesting today's blockbuster report released by the FT. President Trump is expected to sign an executive order this week allowing 401k pension plans to invest in cryptocurrency. This will become one of the most milestone-positive developments in crypto history.
As of the first quarter of 2025, the size of U.S. 401k pensions has reached $8.7 trillion. Meanwhile, the total market cap of cryptocurrency is only $3.8 trillion. This means that funds equivalent to 2.3 times the entire crypto market size are about to gain access. This is groundbreaking significance.
More significantly, the U.S. House of Representatives has passed three important bills regarding Bitcoin and cryptocurrency: (Clarity Act), (Genius Act), and (Anti-CBDC Act).
The biggest victory for the cryptocurrency industry is gaining bipartisan support. Candidates refusing to embrace cryptocurrency can no longer win elections.
As we have always emphasized: institutional capital can no longer ignore cryptocurrency. Over the past 13 years, Bitcoin's annual compound growth rate has reached +90%, outperforming nearly all assets globally.
We continue to receive feedback from institutional investors that their assets under management (AUM) are gradually allocating to crypto assets.
Looking ahead, the core logic driving the rise of cryptocurrency will trigger significant macroeconomic changes. This is redefining the operational paradigm of financial markets.
Lastly, do not forget the strongest bull market engine for cryptocurrency—the U.S. deficit spending crisis. Not only has Bitcoin risen by 55% since April, but the dollar index has also fallen by 10% this year. The dollar has entered an eternal bear market.
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