$400 Million Short Liquidations Explode, Ethereum's Power Breaks Through $2,500

▲ Ethereum (ETH)/AI-generated image ©

Amid expectations of monetary policy easing from the US Federal Reserve (Fed) and a large-scale short squeeze (buying pressure that occurs to liquidate or cover short-selling positions), Ethereum (ETH) showed a sharp rebound in just one day.

According to CoinMarketCap, a cryptocurrency market data aggregator, on September 3 (local time), Ethereum recorded $2,511.88, up 4.98% from 24 hours earlier. This rise is a result of its sensitive reaction to macroeconomic indicators, with a correlation coefficient of 98% with the Standard & Poor's (S&P) 500 index, driving a broader cryptocurrency rally as risk-asset appetite revived across the market.

The primary backdrop for this rally is the dovish (pro-monetary easing) remarks from a Fed official. Fed Governor Christopher Waller indicated that the benchmark interest rate could be frozen if inflation indicators improve, significantly lowering the possibility of a rate hike in September. As expectations of liquidity supply spread across risk assets amid a weakening dollar, Ethereum also reacted sensitively, showing a concurrent upward trend.

Chain liquidations and fund rotation in the derivatives market also amplified the gains. Over $500 million in liquidations occurred in the cryptocurrency market within 24 hours, with short positions alone accounting for $416 million. While forced short covering acted as a catalyst for price increases, funds also flowed into the digital asset narrative of the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) and the Layer 1 sector, leading to a surge in buying pressure for Ethereum, a representative asset.

Buying momentum is also evident in terms of trading volume. The 24-hour trading volume surged by 18.68% to $17.4 billion, supporting the breakthrough of the key support level at $2,400. If Ethereum stably defends the $2,400 level, it could continue its upward trend targeting $2,550, and if it closes above $2,480 on a daily basis, a path for a rebound to the Fibonacci extension level of $2,759 could open.

However, market attention is focused on the US August employment report, scheduled for release on September 4. This economic indicator is expected to be a watershed for gauging the Fed's data-driven policy stance. If the $2,380 level breaks due to a shock from the indicators, there is also a possibility of profit-taking sales pouring in, pushing it back down to $2,300.

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