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Ethereum Analysis: $105M SHORT Liquidations Driving ETH Price to $3k?

By:
Ibrahim Ajibade

Ethereum SHORT traders have suffered liquidations worth over $100 million this week. Will it evolve into a short squeeze and drive ETH price toward $3,000?

Ethereum (ETH) price analysis

In this article:

Insights:

  • Ethereum (ETH) price remains in an upward trajectory this week, pushing above the $2,250 area for the first time since the TerraUST crash in May 2022. 
  • Derivative market data trends show that ETH Short sellers have suffered liquidations worth $70 million in the past week, highlighting the risk of a short squeeze. 
  • Ethereum price rose 10% the last time short liquidations hit these levels around November 9. 

Ethereum (ETH) price continues to edge closer to the $2,300 area for the first time since the TerraUST crash in May 2022. Derivative market data trends show that ETH Short Traders have suffered massive liquidations worth over $100 million in the past week. If the liquidation evolves into a short squeeze, will it propel the ETH price above $2,500?

Ethereum SHORT Traders Have Suffered $105M Liquidation in the Past Week 

Ethereum price has been in an uptrend since Blackrock (BLK:NYSE), the hedge-fund with the highest Asset Under Management (AUM $8.6 trillion), filed for Spot ETH ETF in mid-November. However, the ETH price rally further accelerated above the critical $2,100 area in the past week as the US Fed hinted at future rate cuts. 

The latest bullish wave in the Ethereum spot markets has hit ETH short traders in the derivatives market hard. 

According to Coinglass, a crypto derivatives data tracker, over $104.7 million worth of ETH Short postions have been liquidated between November 28 and December 4. 

Ethereum (ETH) Liquidations | Source: Coinglass
Ethereum (ETH) Liquidations | Source: Coinglass

The Liquidations chart above is a trading metric that tracks the total value of derivatives contracts (Long/Short positions) that get closed out of liquidated during a given period. Trades can either be liquidated due to contract expiration or forcibly closed margin calls.

 

Confident Bullish Traders Continue Paying SHORTs

104.7 million worth of ETH Short positions had been liquidated, the highest weekly liquidation of bullish ETH contracts in over 90 days. Yet, Perpetual ETH Funding Rates are in positive values around 0.015%.

This means Ethereum derivatives LONG traders continue to pay SHORT sellers to keep their positive positions open, affirming their confidence that ETH prices will continue to rise.

Ethereum (ETH) Funding Rate | Source: Coinglass
Ethereum (ETH) Funding Rate vs. Price | Source: Coinglass

These two events (increasing short liquidations and rising funding rates) put ETH markets risk of a classic Short Squeeze.

A Short Squeeze  is a market phenomenon that occurs when traders who have taken Short positions (betting against an asset’s price increase) race to buy more of the asset to fulfill margin requirements and limit their losses.

That buying pressure, in turn, leads to a cycle of accelerating prices. 

Hence, if the ETH liquidations continue to increase, Ethereum price could accelerate towards the $3,000 area in the days ahead.

About the Author

Ibrahim Ajibade Ademolawa is a seasoned research analyst with a background in Commercial Banking and Web3 startups, specializing in DeFi and TradFi analysis. He holds a B.A. in Economics and is pursuing an MSc in Blockchain.

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