Ethereum 'Holds On' Amidst $585 Million Sell-Off Bomb... Will a Short Squeeze Erupt?

▲ Ethereum (ETH), US Dollar (USD) / ChatGPT generated image

Despite investors accumulating massive sell-off positions anticipating a decline, Ethereum (ETH) has rebounded, leading to analysis that these short positions could fuel a future price surge.

According to crypto media outlet NewsBTC on May 9 (local time), sell-off positions are surging in Binance's derivatives market as Ethereum's price shows signs of recovery. A CryptoQuant report analyzed that traders are aggressively engaging in selling even as the market rebounds. The cumulative net taker volume has currently plummeted to approximately -$585 million. This is much deeper than the -$340 million recorded on March 27. The selling pressure is not merely sustained but is intensifying.

The recent market structure shows an unusual pattern where new short positions are being built during a recovery phase. While open interest is rising, taker volume remains strongly negative. This indicates that traders are not simply closing existing long positions but are actively betting on a decline. However, this structure could lead to the opposite outcome. If Ethereum absorbs all the selling pressure and holds its support levels, the accumulated short positions will become the driving force to push prices even higher.

Ethereum's funding rate on Binance has remained in negative territory for several months, from early February until now. Traders continue to pay costs to maintain their sell-off positions even when a price decline does not occur. The report noted that the current rally is viewed with skepticism by the market. Real capital is being deployed for selling, expressing market distrust. If Ethereum does not collapse and continues its upward trend, this very skepticism could act as a catalyst for the next rally.

From a technical analysis perspective, Ethereum is currently trading around $2,280 and undergoing a price compression process. Since the February plunge, resistance levels between $2,300 and $2,400 have suppressed price increases. On the daily chart, a consistent increase in lows is observed, indicating a slowdown in the downtrend. After reclaiming the 50-day moving average, it is interacting with the 100-day moving average, searching for direction. Trading volume has decreased compared to the sell-off period in February. This suggests that the current phase is driven more by position adjustments than aggressive participation.

If Ethereum definitively breaks through the $2,400 resistance level, it will secure new upward momentum. A successful breakthrough would open up the possibility of moving towards higher price targets above. Conversely, if it fails to break the resistance, a temporary sideways movement could be extended. In case of a decline, the $2,100 to $2,150 range will act as the primary support level. A stronger demand zone is formed around $2,000. The market has currently entered a phase of condensing energy ahead of strong price volatility.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*