The Ethereum market is once again displaying a classic "swing" pattern, which hits traders using leverage particularly hard. This week, the volume of forced liquidations of short positions on ETH surged to levels not seen since 2022. This is a powerful signal indicating that bears betting on further declines in the asset have been caught in a trap by a sharp, albeit local, price rebound.
Anatomy of Liquidations: From Longs to Shorts
Analyzing liquidation data on Binance reveals a dramatic shift in sentiment. At the end of June, when ETH plummeted from around $3200 to the $1500 zone, long positions were hit first. The volume of their forced closures peaked at levels comparable to October 2022—one of the most volatile periods in crypto market history.
However, with the onset of July, the picture changed drastically. A small but confident price rebound at the start of the month triggered a wave of liquidations among short sellers. This was particularly evident on July 2, when the largest forced closures of short positions since 2022 were recorded.
What's Behind This Move?
This dynamic is a vivid illustration of the "impatience" and overconfidence of some market participants. In conditions of low volatility and a lack of a clear trend, many traders try to "squeeze" profits by aggressively increasing leverage. They either bet on a continued decline (short) or try to catch the bottom (long), but fail to account for the risks of sharp, opposing movements.
The market, like an experienced player, punishes such daredevils. First, it wipes out longs, driving the price even lower, and then, gaining momentum from liquidations, it sharply reverses and destroys shorts. This is a classic "washout" of positions, which we are witnessing right now. From my perspective, the current situation is not a sign of a global trend reversal, but rather a cleansing of the market from "weak hands" and excessive leverage. Meanwhile, open interest in ETH has sharply declined from a record $33.9 billion to $11.2 billion, indicating a mass exodus of risk capital and a cooling of speculative fervor.