$5 Billion Ethereum Shorts Face Liquidation Crisis as ETH Nears $5,500 Threshold
Ethereum's relentless surge puts massive short positions on the brink—$5 billion hangs in the balance as ETH approaches the critical $5,500 level.
The Liquidation Zone
Traders betting against Ethereum face catastrophic losses if prices hit that magic number. Leveraged positions built during recent consolidation periods now threaten to trigger cascading liquidations across major exchanges.
Market Mechanics Exposed
Short squeezes don't care about fundamentals—they feast on overleveraged pessimism. The same Wall Street geniuses who called crypto a bubble now risk getting their pockets cleaned by decentralized momentum.
When your thesis gets wrecked by a number, maybe your thesis was the problem all along.
- Ethereum dropped under $4,400 even as active addresses and transaction counts hit record highs.
- DeFi growth and lower network fees highlight strong adoption, even amid price volatility.
- Analysts warn of $5B shorts at risk as ETH tests key support near $4,000.
Ethereum dropped to less than the $4,400 price level, despite increasing network activity. Data indicates historic highs in transaction counts, network address activity, and usage of decentralized exchanges.
Analysts expect that ethereum could continue to grow in a similar manner to the 2021 bull run, although network fees and trading dynamics are different, with some predictors speculating on this trend.
Over a 14-day period, the SMA of network transactions exceeded $1.7 million, reaching its highest point to date. It is the most significant number to date and exceeds the number that was witnessed in the 2021 boom.
This has been experienced by a gradual growth not only in the large trades but also among the ordinary users. Analysts also observe that there is bustle on the network, and it is not just a small group of large players who are in demand.
Source: CryptoQuant
Ethereum User Growth and DeFi Surge
Active addresses are similar in pattern. In August, the 14-day Exponential Moving Average (EMA) of unique addresses reached an all-time high in three years. This demonstrates that Ethereum does not just conduct more transactions but is also gaining more users. DeFi, trading and apps attract new participants to the network.
Decentralized exchange (DEX) volumes are hitting all-time highs. DefiLlama data shows that the total value locked (TVL) is being close to the 2021 peak. The Ethereum ecosystem is attracting liquidity and capital back into DeFi or platforms.
Source: CryptoQuant
A key change is in fees. Rather than rising as they have before due to high demand in the previous cycles, the current fee is decent. This sets Ethereum at a lower price to the day-to-day user. The reduced price is anticipated by analysts to contribute to the successful integration in the long run and cut Ethereum off from younger, less expensive chains.
Liquidations Mount as Leverage Builds
Analyst Patel cautioned that more than $5 billion worth of short positions may be sold off if ETH increases to $5,500. As the funding rate increases and the level of open interest swells, the squeeze can be sharp. Such action could drive the prices high in a very short time.
Source: X
The pressure is proven by liquidation data. Ethereum saw $170.08 million in liquidations during the previous day. The long positions had a value of $136.18 million, whereas the short positions are worth $33.90 million. Both bullish and bearish traders are exposed to risk by using high leverage when the volatility grows.
Source: Coinglass
Technically, Ethereum contained an important ascending trendline on June 22. This level has also caused rebounds on a number of occasions during the last three months. In case the price decreases to a level lower than this support line, it may reach the psychological level of 4000. The 50-day SMA is slightly below and gives additional support. If that also breaks, ETH may put to trial $3,470.
In case of bulls, it is essential to reach $4,500. To strive towards a new all-time high, ETH has to rebound and remain above this price. In the meantime, traders anticipate a flat range. Any rebound will demand high volume and long clip holders.
Source: TradingView
Momentum indicators reflect a warning. The Relative Strength Index (RSI) is headed to the neutral levels. The Stochastic Oscillator (Stoch) is close to oversold space. This is an indication that buildings are on bearish momentum but may as well point to a possible recovery in case the selling pressure subsides.
Ethereum passes through a complicated stage. On-chain activity reflects strength and increasing adoption, whereas market structure reflects short-term uncertainty. The ability of ETH to maintain its televised levels or to decline to levels below 4000 dollars will determine its direction in the next few weeks.
