Ethereum's Short Squeeze Throws a Party, Then Forgets to Send the Invite to Spot Demand 🍸

Ethereum [ETH] climbed 11.7% over the past week, but on-chain data indicates that the rebound may have functioned more as an exit ramp than a launchpad for short-term holders. The exchange net position change, which had registered negative readings since mid-May, flipped to a positive bar on Sunday, July 5. A positive reading indicates that net inflows to exchange-affiliated addresses exceeded outflows, a pattern often associated with holders preparing to sell, though it does not guarantee an immediate bearish price reaction.

The 11.7% bounce emerged against a backdrop of bullish technical signals, including a monthly TD Sequential buy signal cited by AMBCrypto, which had raised expectations of a move toward $2,000. Those hopes were undercut when Bitcoin [BTC] was rejected from the $63k area and failed to assail the $64k local supply zone, dragging ETH below $1,800.

Crypto analyst Darkfost highlighted the scale of the derisking in the derivatives market, noting that Open Interest has collapsed from a record high of $33.9 billion in October 2025 to just $11.2 billion. A liquidation volume bubble map showed a heavy concentration of long liquidations toward the end of June, rivaling the magnitude of the October long-liquidation event. The squeeze itself forced a wave of bearish positioning offline, producing $314.5 million in short liquidations so far in July as traders who had bet on further downside were flushed out by the corrective bounce.

Demand-side signals have not validated the rally. The Coinbase Premium Index has remained negative since late April, indicating that U.S.-based investors have not participated in the move toward $1.8k. Meanwhile, the Ethereum holder accumulation ratio, which measures the share of active addresses increasing their balances against those decreasing them, has been declining since May. Lower readings on that ratio have historically coincided with periods of distribution and profit-taking, and the latest data suggests that phase has not yet concluded.