Ethereum Approaches $4K as Shorts Pile Up and Capital Rotates Out of Altcoins
July 21, 2025 — Ethereum is rapidly closing in on the $4,000 mark, fueled by growing bullish momentum, a build-up of short positions, and visible capital rotation away from smaller altcoins. Analysts say the stage may be set for a significant liquidation event that could further accelerate ETH’s breakout.
ETH is currently trading near $3,755, up 5.7% over the last 24 hours and over 25% on the week, according to CoinDesk data. While price action has been strong, sentiment remains divided — with many traders still positioned against the rally.
“This is the most hated ETH rally right now,” posted Crypto Banter on X, pointing to the persistent bearish bias in the market. Data from CoinGlass suggests that nearly $331 million in short positions could be liquidated if ETH crosses the $4,000 threshold — a level that could trigger a wave of forced buying in a classic short squeeze.
Some analysts argue the rally is being driven not only by derivatives positioning but by broader market flows. Pseudonymous trader Pentoshi highlighted the steepest weekly decline in Bitcoin dominance since 2021 as evidence of capital rotating into Ethereum. “This has all the hallmarks of a melt-up,” he wrote, referring to rapid price acceleration driven more by fear of missing out than fundamentals.
He also noted a new structural tailwind: the emergence of ETH-centric treasury strategies by public companies. “There are ETH treasury firms barely a month old already aiming to lock in 1% of the total supply,” Pentoshi said — likely referencing firms like Bitmine Immersion Technologies and SharpLink Gaming, both of which have made billion-dollar ETH allocations in recent weeks.
Meanwhile, crypto analyst Benjamin Cowen pointed out that altcoins, while showing some strength, are still lagging ETH on a relative basis. “Alt/BTC pairs are climbing, but ETH/BTC is clearly leading,” he noted. Cowen suggested that Ethereum is assuming the market leadership role previously held by Bitcoin — now seen by some as the lower-risk play within crypto’s risk spectrum.
With the market heating up and positioning increasingly asymmetric, Ethereum’s path to $4,000 could be less about fundamentals and more about mechanics — with liquidations and capital rotation acting as powerful catalysts in the days ahead.
