Traders Are Shorting Ethereum—But Brace for a Surprise Rally Instead

Ethereum shorts pile up as traders bet against the second-largest crypto. Yet market dynamics hint at an imminent squeeze—one that could catch pessimists off guard.

Why the Pessimism?

Short interest climbed recently amid concerns over network congestion and gas fees. Some hedge funds doubled down, expecting further downside.

The Counter-Signal

History shows crowded shorts often precede violent reversals. Liquidation cascades fuel upside momentum—triggering what analysts call a 'short squeeze rally.'

Timing the Turnaround

Key technical levels loom below current price action. A breach could accelerate covering, propelling ETH upward faster than most expect. Always the way—finance pros overestimate their timing and underestimate volatility.

Stay alert. Markets love proving the majority wrong.

Key Takeaways

Will ETH see a sharp move soon?

Low buy activity and heavy short positioning are indicative of either a breakout or sudden correction.

Is there buying power ready to push ETH higher?

Over $1.6 billion in stablecoins flowed into ETH in 24 hours, showing strong demand.

The spotlight’s on ethereum [ETH]!

On Binance, buy activity is unusually low while short positions are building, this can lead to a sharp drop or a sudden spike.

At the same time, $1.6 billion in stablecoins flowed into ETH in just 24 hours, showing plenty of buying power ready to move.

Will this push ETH higher, or spark a quick correction?

ETH traders turn bearish on Binance

Ethereum traders on Binance are showing unusually strong bearish sentiment, with the taker buy/sell ratio dropping below 0.87 on the 19th of September.

Source: Cryptoquant

This is a level reached only twice earlier this year.

The data shows heavy positioning on the sell side as ETH hovers NEAR an ATH around $5,000.

Similar lows in January and February coincided with declines below $1,500. The 7-day average was at 0.93 at press time, marking the year’s lowest point.

This could mean a potential risk of a correction, but extreme bearish consensus can also cause short squeezes if buying pressure returns.

A pullback and a rally

Analyst TedPillows noted on X that ETH has been consolidating just below its 2021 ATH.

Source: X

He added that the pattens show at least a 25%+ correction after reaching previous ATHs. A similar MOVE this time could bring prices down to around $3,700-$3,800 before resuming an upward trend.

Source: Token Terminal

Meanwhile, the stablecoin supply on Ethereum has surged to a new ATH of roughly $173 billion, up $50 billion since the start of the year.

This massive inflow of stablecoins indicates significant buying power in wait, potentially fueling a strong rally that could drive ETH toward $10,000 by early 2026.

ETH faces key support and resistance levels

Following all this, Ethereum’s price action is entering a critical phase.

The chart showed ETH consolidating around $4,470-$4,500, with short-term support near $4,460 and immediate resistance around $4,495.

RSI showed neutral momentum, while the MACD showed a slightly bearish bias but no strong trend yet.

Source: TradingView

In the short term, a break above $4,495 could trigger a rebound toward $4,550, while falling below $4,460 may open the path to $4,400.