Coin Bureau|26. Aug.
What Really Caused Ethereum's EPIC Rally
Ethereum Short Squeeze: What Really Caused the Epic Rally
The Liquidation Event- Between August 19–21, over $2.7 billion in short positions were liquidated within a 24-hour window, with 48-hour totals reaching $4 billion.
- Ethereum accounted for roughly $1.13 billion – the largest one-sided short liquidation event since November 2021.
- A trader known as PensionUSDT lost about $24 million, nearly half of their lifetime profits from shorting crypto.
- More than 172,000 traders were wiped out in the same window.
- Positioning + market depth: ETH had heavily net-short open interest and negative funding rates, while Bitcoin had been ranging sideways for weeks.
- Supply squeeze: ETH held on exchanges fell from ~7.7 million to ~6.54 million ETH (mid-August), a decline of about 15%.
- Thin order books: Above $1,950–$2,000, there was little resting supply, creating a vacuum that amplified the price surge.
- Redistribution, not dumping: Wallets with 1–10 ETH increased their share to 4.52%, meaning coins were changing hands rather than being sold.
- Bears argued that Layer-2 networks cannibalized Ethereum mainnet: less activity → fewer fees → less ETH burned.
- But this was not a sign of weakness – it was the deliberate result of Ethereum’s roadmap:
- EIP-4844 and the Fusaka upgrade cut L2 fees by over 90%.
- The upcoming Glamsterdam upgrade (Glowaz + Amsterdam) promises massive scalability – its first public testnet launched exactly during the short squeeze, with mainnet targeted for Q4.
- Ethereum hosts ~$165 billion in stablecoins – over half of the global market.
- June saw a record $1.79 trillion in global stablecoin settlement volume, with Ethereum + L2s taking the largest share.
- Tokenized US Treasuries approached $16 billion.
- ~34% of all ETH (~41.7 million coins) is staked and locked out of circulation.
- One day before the squeeze, the SEC under Paul Atkins proposed a sweeping new crypto rulebook (402 pages):
- Startup exemption: raises up to $5 million over 4 years without accredited investor restrictions.
- Tiered fundraising: up to $20M with simple disclosures, or up to $75M with audited accounts.
- Safe harbor: tokens could cease being treated as securities once promised work is completed or abandoned.
- This could pave the way for an “ICO 2.0” – and much of it would likely happen on Ethereum, where capital, stablecoins, and institutional custody already sit.
- After H1 outflows, July brought $365 million in net inflows into US spot ETH ETFs – outpacing Bitcoin ETFs for the first time on a monthly basis.
- August saw the longest inflow streak since October 2025.
- BlackRock’s staked Ethereum Trust (ETHB) attracted over $600 million; Fidelity filed for full staking capabilities.
- Bears were working from accurate data, but drew the wrong conclusion: concerns were more than priced in.
- Barring major negative surprises, the setup looks bullish for ETH going forward.
