Ethereum sprints to $4,000: What happened?

Author: The Kobeissi Letter; Translation: Jinse Finance xiaozou

Ethereum is making history:

We are witnessing one of the largest short squeezes in the history of cryptocurrency. Ethereum's market value has skyrocketed by $150 billion since July 1st - just a few days ago, net short positions hit a record high.

What exactly happened? This article explains it for you.

See the chart below:

According to Zerohedge data, Ethereum's net leveraged short position reached a historical peak when entering July. In fact, net short exposure is about 25% higher than the level in February 2025. This directly led to Ethereum's 70% surge in less than a month.

But the story is far from over.

President Trump's World Liberty Financial has been increasing its holdings of Ethereum. The latest trading records show that just 24 hours ago, the institution completed a $5 million purchase. This added fuel to the already fierce short squeeze.

It is worth noting that most of these short positions come from institutional capital.

More intriguing is:

The Zerohedge report shows that BlackRock ETF increased its holdings of Ethereum on 29 of the 30 days before July 1. But as mentioned earlier, due to the sudden surge in leveraged short exposure, prices continued to fall. Obviously, "smart money" predicted this storm.

Now we are witnessing: billions of dollars of short positions are being liquidated in a chain. If Ethereum rises another 10%, another $1 billion of short positions will be liquidated.

In addition, since most of these short positions are leveraged, the market is facing stronger short squeeze pressure.

Ethereum may soon hit $4,000.

We have also observed a similar effect on Ripple, while Bitcoin continues to show relative strength. Bitcoin has officially returned to the $120,000 mark, and its market value has increased by $900 billion since the April low. After months of slump, Ethereum and Ripple are finally catching up with Bitcoin's gains.

We predicted this trend in advance. Here are some early warning tips we provide for senior members: We bought the bottom in batches at 80,000, 90,000 and 100,000 US dollars, and accurately predicted the target of 115,000 US dollars. Last week we raised the target to 120,000 US dollars+, and this goal has just been achieved.

More importantly, the market is digesting the heavy report released by the FT today. President Trump will sign an executive order as soon as this week to allow 401k pension plans to invest in cryptocurrencies. This will become one of the most milestone positives in the history of encryption.

As of the first quarter of 2025, the size of US 401k pension funds will reach 8.7 trillion US dollars. The current total market value of cryptocurrencies is only 3.8 trillion US dollars. This means that funds equivalent to 2.3 times the size of the entire crypto market will soon gain access. This is of epoch-making significance.

More importantly, the U.S. House of Representatives passed three important Bitcoin and cryptocurrency bills: the Clarity Act, the Genius Act, and the Anti-CBDC Act.

The biggest victory for the cryptocurrency industry is that it has gained cross-party support. Candidates who refuse to accept cryptocurrency can no longer win elections.

As we have always emphasized: institutional capital can no longer ignore cryptocurrency. Over the past 13 years, Bitcoin has grown at a compound annual growth rate of +90%, outperforming almost all assets in the world.

We continue to receive feedback from institutional investors that their assets under management (AUM) are gradually being allocated to crypto assets.

Looking ahead, the core logic driving the rise of cryptocurrencies will trigger major macroeconomic changes. This is redefining the operating paradigm of financial markets.

Finally, don’t forget the strongest bull market engine for cryptocurrencies - the US deficit spending crisis. Not only has Bitcoin risen 55% since April, the US dollar index has fallen 10% this year. The US dollar has fallen into a perpetual bear market.