Ethereum Targets $2K as Binance Reserves Shrink—Is a Short Squeeze Brewing?

Ethereum’s price action hints at a bullish breakout as exchange reserves—particularly on Binance—hit multi-month lows. Traders are whispering about a potential short squeeze that could send ETH past psychological resistance at $2,000.

Supply crunch or smoke and mirrors? The ’free float’ narrative gains traction every time CEX wallets thin out—until some quant dumps a leveraged ETF rebalance onto retail. Watch the derivatives heatmap: if funding turns positive while spot demand holds, the bears might get roasted.

Declining Exchange Supply Signals Reduced Selling Pressure

A recent analysis by Amr Taha, a contributor to CryptoQuant’s QuickTake platform, points to a significant decline in Ethereum’s Exchange Supply Ratio on Binance — a metric that tracks the amount of ETH held on the platform relative to its circulating supply.

According to Taha, this ratio has now reached a multi-week low, signaling that more Ethereum is being pulled off Binance, potentially to cold storage or decentralized finance (DeFi) protocols.

Taha explains that this decline in the exchange supply ratio historically indicates reduced sell-side pressure, as users often withdraw assets when they plan to hold or deploy them in alternative protocols rather than sell.

The development is particularly notable on Binance, which remains the largest crypto exchange by volume and liquidity. As such, changes in its ETH reserves can often reflect broader market sentiment shifts.

To illustrate this trend, Taha points to a similar case in April, when a sharp reduction in ETH’s exchange supply on Binance was followed by a price rally from below $1,700 to roughly $1,950, a 14% move within days.

The analyst suggests the current pattern may be setting the stage for a similar development, especially given what’s happening on the derivatives side of the market.

Ethereum Short Squeeze Setup Emerges Around $1,900–$2,000

Heatmaps tracking liquidations indicate the presence of a growing cluster of short positions between $1,900 and $2,000. According to Taha, this layer of aggressive short interest creates a zone of potential upward price movement if those positions are forced to close in a short squeeze.

Particularly, if ETH climbs into that range, the resulting liquidations could amplify upward momentum. In this scenario, the cost to move ETH’s price higher decreases as the available supply on exchanges continues to decline.

Taha notes that the combination of falling exchange balances and rising short interest creates favorable conditions for what he describes as a “liquidity hunt” — a situation where price is pushed to trigger liquidations and capitalize on trapped positions.

With ETH’s current price momentum and the reduction in sell-side resistance, the $1,900 to $2,000 range is increasingly becoming a focal point.

Featured image created with DALL-E, Chart from TradingView