Ethereum breaks $2,000 as $1.57B short squeeze fuels crypto rally

Ethereum climbed 8 percent to $2,080 on Wednesday, breaking $2,000 for the first time since June 2 after $1.57 billion in short liquidations.

According to Coinglass data, approximately $1.57 billion in positions were liquidated over 24 hours, with $1.41 billion representing short positions. The largest single liquidation was a $32.18 million ETHUSDT perpetual position on Bitget.

The breakout extended Ethereum's Q3 recovery, with ETH up 31.1 percent in the third quarter after a 25.3 percent decline in Q2. Spot Ethereum ETFs recorded $71.47 million in daily inflows, pushing total assets to $10.83 billion. Open interest in ETH derivatives surged nearly 10 percent in 24 hours as leveraged traders positioned for further gains.

The rally was driven by the US Treasury's plan to double long-term debt buybacks, which investors read as a liquidity boost for risk assets. Bitcoin briefly approached $70,000, peaking at $69,700, as the broader crypto market strengthened. ETH now faces immediate resistance at $2,100, with a four-hour close above that level potentially opening the path toward $2,120 and $2,160.

Short Squeeze and ETF Flows Underpin Breakout

The liquidation cascade was among the most violent of the year for crypto derivatives. Approximately 114,038 traders were liquidated in the move, with Bitcoin gaining $4,400 within 50 minutes as shorts rushed to cover. The total crypto market capitalization jumped $113 billion in a single day, according to market data. Solana, BNB, Dogecoin, and Cardano all gained ground as the broader market strengthened.

Institutional demand has been building steadily. Spot ETH ETFs attracted $245 million in net inflows during the first full week of August, including a single-session peak of $92.15 million on Aug. 6, with BlackRock's iShares Ethereum Trust accounting for $81.14 million of that haul. Staking-enabled ETF products from Grayscale, 21Shares, and BlackRock offer a yield layer with no Bitcoin equivalent, with base staking rewards of 2.6 percent annually.

Can ETH Hold Above $2,100?

The Relative Strength Index sits at 87.41, well into overbought territory, while the Chaikin Money Flow reads 0.62, indicating strong capital inflows. The Federal Reserve's July FOMC minutes, released at 2 p.m. ET Wednesday, showed a 9-3 vote to hold rates at 3.50-3.75 percent, with three regional presidents dissenting in favor of a hike. September hike odds stand around 34 percent, implying roughly a 66 percent probability of a pause.

Michaël van de Poppe has set a $2,800 upside target for ETH once $2,000 is cleared, identifying $1,870 as the near-term support that must hold. Tom Lee, chairman of BitMine Immersion Technologies, pointed to the ETH/BTC ratio at a three-month high above 0.30 as evidence of strengthening conditions. Standard Chartered maintains a $4,000 year-end target for 2026.

A rejection below $2,100 could push Ethereum to first support at $2,050, with further pullback challenging the $2,000 mark before the previous resistance at $1,960. The ability to hold above $2,000 will determine whether this breakout marks a genuine trend reversal or another failed rally attempt in a market that has spent most of the year below this level.

This article is for informational purposes only and does not constitute investment advice.