ETH price decline to $3K prepares for $7B short squeeze if crypto market recovery continues

Ether Price Falls and Market Trends

Ether dropped to $3,055, leading to $1.3 billion lost in long-term liquidations across various exchanges.

There’s currently a short position exceeding $7 billion around the $4,000 mark, indicating potential for a rapid decline.

A hidden bullish divergence hints at a possible bottom forming near $3,000.

On Tuesday, Ether (ETH) traded at $3,055, marking a weekly drop of over 13%. This decline wiped out liquidity from lows of around $3,400, where significant leverage had accumulated. The next substantial liquidity area is found between $3,000 and $2,800, which has historically acted as long-term support.

During this downturn, Binance witnessed over $39 million in long positions liquidated—the highest amount since October 10. Overall, liquidations in the market surpassed $1.3 billion, creating a stark imbalance between long and short positions.

Review of ETH Market Stages in 2025

According to data from CryptoQuant, Ether has navigated four distinct market phases in 2025: decline, accumulation, markup, and distribution. On the downside, ETH has dipped beneath several volume-weighted average price (VWAP) levels, which function as dynamic indicators of support and resistance, influenced by the average price paid by buyers. Key events, including former President Trump’s victory and the all-time highs recorded in 2021 and 2024, have confirmed a seller-favored market.

Subsequently, ETH experienced a 10-week accumulation within the $2,000 to $3,000 range, before surging past the VWAP during the markup phase to hit an annual peak in August. The latest phase indicates that buyers are losing influence, as ETH has been caught between the VWAP stemming from its all-time high and the $3,800 mark, eventually breaking below these lows earlier this week.

ETH is now testing long-term VWAP support again, suggesting that the correction may be nearing its end.

Potential for a Short Squeeze

Current declines in ETH have generated interest in short positions, with over $7 billion concentrated at the $4,000 level. If the price momentum shifts near the $3,000 support level, even a slight recovery could lead to a cascade of liquidations for short sellers, potentially accelerating a market rebound.

Moreover, the daily chart for ETH displays a hidden bullish divergence between its price movement and the Relative Strength Index (RSI). Despite the price forming lower lows, the RSI remains at similar levels, which can often indicate an impending trend reversal.

Crypto trader Daan Trades remarked, “$ETH has completely rejected its previous cycle highs and is now back from $2.8K to $4.1K. There is a good chance this will fall precipitously before volatility spikes again.”

This article does not provide investment advice or recommendations. Investment and trading involve risks, and readers should conduct their own research when making decisions.