Ethereum’s Climb Toward $4K Could Wipe Out $331M in Shorts, Analyst Says

Ethereum Eyes $4K as Short Squeeze Risk Builds and Capital Rotates from Alts

July 21, 2025 — Ethereum is closing in on the $4,000 mark as bullish momentum intensifies, fueled by a combination of short positioning, capital rotation from altcoins, and growing institutional demand.

ETH is currently trading around $3,755, up 5.7% on the day and more than 25% over the past week, according to CoinDesk data. The rally — one of the strongest in recent months — has sparked widespread debate among market participants, with many pointing to a potential short squeeze as the next catalyst.

“$ETH is the most hated rally right now,” posted Crypto Banter on X, referring to the unusually high level of short interest. Data from CoinGlass shows that if ETH breaks above the $4,000 level, roughly $331 million in short positions could be liquidated, potentially triggering a cascade that propels prices even higher.

Beyond derivatives positioning, analysts are also tracking a notable shift in market structure. Pseudonymous trader Pentoshi highlighted the steepest weekly drop in Bitcoin dominance in four years as evidence of capital rotating into Ethereum. “Enjoy the next few weeks,” Pentoshi wrote, describing the move as a classic “melt up” — a rapid, sentiment-driven surge untethered from immediate fundamentals.

He also pointed to a growing tailwind: the rise of ETH-focused corporate treasuries. “We now have ETH treasury companies barely a month old, already competing to buy 1% of the total supply,” he noted — an apparent reference to Bitmine Immersion Technologies and SharpLink Gaming, both of which have acquired large ETH positions in recent weeks.

Meanwhile, analyst Benjamin Cowen observed that altcoins continue to lag despite broader market gains. “Alt/BTC pairs are moving, but ETH/BTC is outperforming,” he said, suggesting Ethereum is becoming a preferred risk-adjusted asset — similar to Bitcoin’s role in previous cycles.

As Ethereum edges closer to the $4K level, all eyes are on whether a liquidation cascade and continued capital rotation can fuel the next leg of the rally — potentially placing ETH at the center of a shifting market regime.