Ethereum is experiencing a significant supply shock driven by a record number of leveraged short positions and over 29% of its total supply being locked in staking protocols. This dual pressure has substantially reduced immediately available ETH in circulation, creating conditions ripe for potential price volatility and short squeezes.
On-chain analytics reveal substantial ETH withdrawals from centralized exchanges, further tightening market liquidity. This scarcity effect amplifies upward price pressure as available supply diminishes. While ETH has recently reclaimed the $3,000 threshold, it remains 38% below its all-time high recorded in November 2021.
Prominent crypto strategist MerlijnTrader projects could surge could surge toward $10,000, particularly if anticipated ETF staking approvals materialize before year-end. This bullish outlook hinges on the current supply dynamics potentially triggering cascading short liquidations.
The supply shock scenario heightens prospects for significant upward momentum but simultaneously elevates market instability risks. Market participants are closely monitoring these conditions as reduced exchange reserves and leveraged positions create a volatile trading environment.