Why a 20% Ethereum rally could become the biggest short squeeze yet

Key Takeaways

Could Ethereum trigger a short squeeze soon?

Yes, over $9.5 billion in ETH short positions could be liquidated if prices rally 20%, making upside volatility likely.

Are smart money and traders buying Ethereum again?

Yes, even panic sellers are buying ETH back at higher prices.

Ethereum [ETH] could be nearing a key inflection point, with roughly $9.5 billion in short positions on the line. A 20% price jump could trigger widespread liquidations, making a rally the “path of maximum pain” for traders betting against it.

At the same time, on-chain data showed that even hackers who panic-sold during last week’s crash have been buying back ETH at higher prices.

With Ethereum competing closely with Solana [SOL] for dominance in DEX Volumes, market sentiment appeared to be turning cautious, yet optimistic.

A short squeeze on the horizon

Ethereum’s Exchange Liquidation Map showed an asymmetric setup: roughly $9.5 billion in short positions could be wiped out if ETH rallies just 20% from recent levels, while only $2.6 billion in longs face liquidation on a similar downside move.

Data showed concentrated short liquidations building around the $4,100-$4,200 zone, so that any upward push could trigger cascading buy orders.

Source: X

Cumulative short leverage was far outweighed by long positions. The path of “maximum pain” – and potential volatility – is tilted to the upside.

Panic selling turns costly as smart money buys the dip

Source: X

During the liquidation-led crash, hackers offloaded 8,638 ETH (worth $32.5 million) at $3,764. They realized a $5.5 million loss in the chaos.

But as prices rebounded, the same wallets repurchased 7,816 ETH for $32.5 million at $4,159. They effectively bought back at higher prices, proving how sharp market reversals punished emotional sellers.

Meanwhile, Solana and Ethereum dominated Q3 DEX Volumes, maintaining their lead as top networks for trading activity.

Source: X

The shift is proof of a resilient DeFi market. Even during record liquidations, liquidity concentration and opportunistic buying on major chains helped pave Ethereum’s path to recovery.