Have you ever watched a trade go exactly the way you hoped, only to see the market suddenly turn on everyone who bet against you? That’s exactly what happened to Ethereum shorts yesterday.
In less than 24 hours, more than $120 million in leveraged short positions got absolutely torched as ETH rocketed from the low $3,100s all the way to $3,380. For anyone who’s been around crypto long enough, that kind of move feels familiar — it’s the sound of a short squeeze warming up.
The Setup That’s Making Traders Nervous
Let’s be honest: most of the last six weeks have been painful for Ethereum bulls. The price carved out a textbook falling wedge, bled slowly lower, and sentiment turned ice-cold. Bears were loud, funding rates flipped negative, and it felt like the path of least resistance was straight down to $2,800 or even lower.
And then, almost overnight, everything changed.
The rebound started quietly enough, but the moment ETH cleared the upper trendline of that wedge, the dominoes started falling. Shorts who had piled in expecting another leg down suddenly found themselves underwater — fast.
Short Liquidations Tell the Real Story
According to data aggregated across major exchanges, Ethereum short liquidations topped $120 million on December 9 alone. Only Bitcoin saw more pain on the bearish side ($160 million). That’s a massive amount of forced buying hitting the market in a very short window.
When shorts get liquidated at scale, it creates a feedback loop: price goes up → more shorts hit stop-loss → more buying pressure → price goes up even faster. We’ve seen this movie before, and it rarely ends well for the bears.
“A short squeeze isn’t just price going up — it’s price being forced up by people who were wrong having to cover at any cost.”
Supertrend on the Verge of Flipping Green
Perhaps the most interesting technical development right now is what’s happening with the Supertrend indicator on the daily timeframe.
For the uninitiated, the Supertrend is a trend-following indicator that flips from red (bearish) to green (bullish) when price closes convincingly above a dynamic ATR-based trailing stop. It’s brutally simple, but surprisingly effective — especially on higher timeframes.
Right now, Ethereum is trading directly on that line. One strong daily close above ≈ $3,420 and the indicator flips green for the first time since early July. And if you pull up the chart from July, you’ll notice something striking: the previous flip preceded a 100%+ rally that took ETH to its all-time high.
History doesn’t repeat, but it sure rhymes.
Funding Rates and Open Interest Are Confirming Strength
Another bullish tell: perpetual futures funding rates have stayed stubbornly positive throughout this entire move. That means longs are willingly paying shorts to keep their positions open — a classic sign of conviction.
At the same time, total ETH open interest bottomed out around December 4 and has been climbing steadily ever since. Rising OI alongside rising price is textbook accumulation behavior.
- Funding rate: positive and stable
- Open interest: rebounding from multi-month lows
- Short liquidations: $120 million+ in a single day
- Price action: clean break of the falling wedge
When you put all these pieces together, the picture becomes pretty clear: the market is shifting from distribution to accumulation.
Big Players Keep Buying the Dip
It’s not just retail getting squeezed. Institutional accumulation has been relentless.
One publicly traded company alone added another $429 million worth of ETH to its balance sheet in recent weeks, bringing their total holdings above $11 billion. Their stated goal? Own 5% of all Ethereum in existence over time. That’s not a hedge. That’s a conviction play.
Meanwhile, exchange balances continue to hit fresh all-time lows. Every rally seems to trigger another wave of withdrawals to self-custody or staking contracts. Less supply on exchanges = less available to sell when price runs.
What Could Push ETH to $4,000 (and Beyond)
If the Supertrend does flip green, the measured move from the falling wedge breakout points to roughly $4,200–$4,400. That lines up nicely with:
- The 1.618 Fibonacci extension of the recent swing
- Previous all-time high liquidity zone
- Psychological $4,000 level
Add in potential tailwinds like a Federal Reserve rate cut this month (currently priced at 95% probability) and continued spot ETF inflows, and the path higher starts looking almost too obvious.
Of course, nothing is guaranteed in crypto. A rejection here could still send us back to test wedge support around $3,000. But the risk/reward at current levels feels heavily skewed to the upside.
The Bottom Line
Ethereum is showing all the classic signs of a trend reversal in progress: massive short liquidations, rising open interest, positive funding, institutional accumulation, shrinking exchange supply, and a major technical indicator on the verge of flipping bullish.
I’ve been trading crypto since 2017, and setups like this one don’t come around every week. When the market starts squeezing shorts this hard while big money keeps buying quietly in the background, smart traders pay attention.
The Supertrend flip hasn’t happened yet — but it’s close. And if it does, $4,000 might end up being just a pit stop, not a destination.
Buckle up.
