Ethereum, up 30%, but in crisis? ..."Short squeeze coming" warning

▲ Ethereum (ETH)

Ethereum (ETH) has risen 30% from its low. However, strong short positions are being maintained in the market, creating an abnormal structure.

NewsBTC reported on May 2nd that Ethereum rebounded 30% from its February low, but many market participants are not acknowledging the rise and are maintaining aggressive short positions.

This trend is connected to the market sentiment formed after the previous sharp decline. Ethereum fell approximately 65% from its previous high, shocking the entire altcoin market, and the total market capitalization of altcoins, excluding Bitcoin, also decreased by over 51%.

Subsequently, a clear rebound occurred, but the market sentiment remained unchanged. Analyst DarkPost pointed out that even during the upward trend, investors continued abnormal positioning, focusing on short selling instead of buying.

In particular, the fact that the Binance funding rate consistently recorded negative values for over a month, maintaining an average level of -0.0018, was identified as a key signal. This means that market participants are paying fees to maintain their short positions.

A similar structure last appeared in November 2022, during the FTX collapse, at the end of the previous bear market. At that time, short selling was excessively accumulated during the rebound phase, followed by a strong upward trend.

Currently, a structure is forming in the market where short position liquidations are increasing, leading to additional buying pressure. The analysis suggests that a typical short squeeze environment is being created where excessive short positions are actually accelerating the upward movement.

In the short term, Ethereum's movement is limited within key resistance areas, but as long as short positions are maintained, a trend of increased volatility is likely to continue.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*