Ethereum (ETH) has experienced a significant price increase, climbing to its highest level in several weeks and marking a 30% recovery from its November low. The upward momentum is driven by a combination of macroeconomic optimism, aggressive short squeezes, and bullish technical signals.

Market Dynamics Fueling the Surge

A major catalyst for the recent rally is a surge in short liquidations. According to data from CoinGlass, over $120 million in bearish Ethereum positions were liquidated, a figure second only to Bitcoin’s $160 million. These liquidations occur when the price moves against leveraged short sellers, forcing their positions to be closed automatically, which in turn adds buying pressure to the market.

This trend is reinforced by a consistently positive funding rate for Ethereum futures. A positive rate indicates that traders holding long positions are willing to pay a premium to those holding short positions, signaling a broad expectation that prices will continue to rise.

Broader market sentiment is also playing a key role. Investors are increasingly optimistic about a potential interest rate cut by the Federal Reserve. Data from prediction markets like Polymarket shows overwhelming odds of a cut, which typically boosts the appeal of riskier assets like cryptocurrencies. Adding to the upward pressure, reports indicated significant accumulation by the firm BitMine, which purportedly acquired over $429 million in ETH as part of a long-term strategy. This large-scale buying coincides with a continued decline in the supply of Ethereum held on exchanges, suggesting a trend toward long-term holding.

Technical Indicators Signal Further Upside

From a technical standpoint, Ethereum’s chart presents a compelling case for continued growth. The price has successfully broken out from the upper boundary of a falling wedge pattern, which is widely regarded as a bullish reversal signal.

Furthermore, ETH is on the verge of flipping the Supertrend indicator from red to green. This technical tool is used to identify the primary direction of a trend. The last time this shift occurred was in July, preceding a rally that eventually led to a new all-time high months later. If history repeats, this technical development could propel Ethereum’s price toward the $4,000 level.

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