Ethereum (ETH) Shorts Hit Record Highs — Is Short Squeeze Coming?

Ethereum (ETH) has been consolidating within a downward-sloping channel, showing signs of potential trend reversal. The 4-hour chart suggests the completion of a corrective wave structure, while the 1-hour chart highlights a symmetrical triangle breakout. Fibonacci levels and Elliott Wave counts provide key insights into the asset’s next moves.

Ethereum Shorts Over $11 Billion

Ethereum (ETH) has recently witnessed an unprecedented surge in short positions, totaling $11.3 billion—the highest in its history. This significant increase indicates a strong bearish sentiment among traders, anticipating a decline in ETH’s price. 

Such a substantial volume of short positions typically exerts downward pressure on the asset, as selling activities dominate the market. However, contrary to these expectations, ETH experienced a swift price recovery, rebounding from $2,604 to a high of $2,698. 

This rapid reversal suggests the occurrence of a short squeeze, where traders who bet against ETH were compelled to close their positions, thereby driving the price upward. 

Despite the record-breaking short positions, the bears have not managed to seize control of the market, and ETH continues to trade within a range, reflecting a balance between bullish and bearish forces.

ETH Price Analysis

The 4-hour chart of Ethereum shows the asset trading within a well-defined descending channel, following a corrective WXY structure. The corrective wave culminated in a low near $2,500, aligning with the 0.5 Fibonacci retracement level from the prior impulsive wave. This level acted as a pivotal support zone, preventing a deeper decline, despite the price spiking down to $2,125 area.

The Relative Strength Index (RSI) on the 4-hour chart has been forming a series of higher lows, diverging from the price action. This suggests waning bearish momentum, increasing the likelihood of an upcoming reversal.

Ethereum is currently attempting to break out of the descending structure, with the first major resistance at $3,031—the 0.236 Fibonacci retracement. A clean breakout above this level would confirm that the corrective phase is over, opening the door for a sustained uptrend.

However, failure to break out could lead to a rejection, with the price revisiting $2,500, a critical support level that aligns with 0.5 Fibonacci retracement. A deeper drop towards $2,125 (0.618 Fibonacci) could occur if bearish momentum regains control.

ETH Price Prediction

Shifting to the 1-hour chart, Ethereum is in a symmetrical triangle, which suggests a possible shift in momentum. The anticipated upward breakout aligns with the completion of a wave (ii) correction, implying that Ethereum may now be entering wave (iii) of a new impulsive structure.

For confirmation, ETH needs to reclaim the $3,078 resistance and establish it as support. The 1.618 Fibonacci extension of the previous move projects a wave (iii) target at $3,495, making it the first major upside target. A successful breakout could further push ETH towards $3,730 (wave (v) target).

Alternatively, if Ethereum fails to sustain momentum above $3,078, a retest of the $2,881 (0.382 Fibonacci retracement) could occur, with $2,500 acting as a major pivot point for bullish invalidation. If ETH loses this level, a deeper correction toward $2,125 may follow.

Overall, while the breakout is promising, volume confirmation and a reclaim of $3,078 are essential to confirm a trend shift.

Key Levels to Watch

• Immediate Resistance: $3,031 (0.236 Fibonacci level)
• Key Resistance: $3,078 (breakout confirmation level)
• Major Resistance: $3,495 (1.618 Fibonacci extension)
• Immediate Support: $2,881 (0.382 Fibonacci retracement)
• Key Support: $2,500 (0.5 Fibonacci retracement)
• Critical Support: $2,125 (0.618 Fibonacci retracement)
• Short-Term Target for Wave (iii): Above $3,495 if momentum sustains.
• Invalidation Zone: Below $2,500, signaling a bearish continuation.