Ether (ETH) experienced a significant price drop, falling to $3,055 on Tuesday and extending its weekly decline to over 13%. This sharp movement liquidated approximately $1.3 billion in long positions across cryptocurrency exchanges. The decline wiped out liquidity from the equal lows near $3,400, a zone that had attracted substantial leverage. The next significant liquidity pocket is now identified between $3,000 and $2,800, areas that have historically served as strong long-term structural supports.
On Binance alone, over $39 million in long positions were liquidated during this correction, marking the largest single-day liquidation since October 10. The total market-wide liquidations for long positions have now surpassed $1.3 billion, significantly resetting the derivative landscape and creating a substantial imbalance between long and short positions.
Analysis of Ether's Market Stages in 2025
According to data from CryptoQuant, Ether has cycled through the four classical market stages this year: decline, accumulation, markup, and distribution.
During the decline phase, ETH broke below multiple Anchored Volume-Weighted Average Price (AVWAP) levels. AVWAPs are dynamic support and resistance lines that represent the average price at which an asset traded, weighted by volume, from a specific starting point. The breach of key AVWAPs anchored from significant historical events, including the Trump Election Victory, the first all-time highs (ATHs) of 2021 and 2024, and the July 2020 candle, confirmed a market controlled by sellers.
Following this period of decline, ETH entered a 10-week accumulation phase, trading within the range of $2,000 to $3,000. Subsequently, it rallied through these same AVWAP levels during its markup stage, reaching a yearly high in August. However, the recent distribution phase indicated a loss of control by buyers as ETH compressed between the AVWAPs from the ATH and $3,800. This consolidation was followed by a breakdown on high trading volume early in the week.
Currently, ETH is testing long-term AVWAP supports again, which suggests that the ongoing correction may be nearing its exhaustion point.
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Ether Short Squeeze Setup is Forming
The current drop in ETH price has positioned the market for a potential short squeeze, with over $7 billion in short position liquidity clustered around the $4,000 level. If price momentum reverses near the $3,000 support, even a modest recovery could trigger cascading liquidations of over-leveraged short positions, thereby accelerating a rebound.
Further bolstering the bullish outlook, ETH's daily chart exhibits a hidden bullish divergence between the price action and the Relative Strength Index (RSI). This pattern, where the price forms lower lows while the RSI holds equal lows, is often an indicator of an impending trend reversal.
Crypto trader Daan Trades commented on the market conditions, stating:
“$ETH has fully rejected from that previous cycle high and is now back in that $2.8K–$4.1K. Good chance this chops around before another volatility spike.”
Related: Ethereum erases its 2025 gains: Is ETH price headed to $2.2K next?