Ethereum Surges 40%: Tech, Short Squeeze, and Whale Activity Creates Massive "ETH Moment"
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In recent days, Ethereum (ETH) has led a powerful rally across the crypto market, surging over 40% in just 72 hours and breaking past the $2,600 mark, potentially emerging as the new "market driver" following Bitcoin's post-halving momentum.
This sharp upswing marks ETH's best three-day performance since 2019 and has outpaced both Bitcoin and other major digital assets across multiple metrics. Behind the rally lies a confluence of factors: improving macro sentiment, Ethereum's own upcoming technical upgrades, a short squeeze in the futures market, and on-chain accumulation by whale addresses. This article will analyze the drivers behind Ethereum's surge across four key areas: macro environment, protocol upgrades, market structure, and on-chain capital flows.
1. Macro Recovery and the Pectra Upgrade: Fundamental Drivers Behind the ETH Price Rally
Ethereum's recent surge is not without cause. It is underpinned by a combination of technical progress and favorable macro conditions. The convergence of these two forces has laid a solid foundation for the rebound.
1.1 Pectra Upgrade: Core Improvements and Renewed Confidence
On May 7, Ethereum successfully completed the Pectra upgrade on its mainnet, an important milestone following the Merge and Dencun upgrades that includes several key improvements:
- EIP-7702: Introduces Account Abstraction to improve wallet flexibility and scalability.
- Staking Cap Increase: Expands capacity for liquid staking protocols and node operators.
- Improved Developer Experience: Simplifies smart contract deployment and integration.
These technical upgrades mark another evolution in Ethereum's infrastructure. They strengthen support for future DeFi, Layer-2, and Rollup projects, while also restoring confidence in Ethereum's long-term ecosystem development.
1.2 Macro Tailwinds: Risk Appetite Returns
Beyond the technical drivers, external macro events also played a key role. On May 8, the announcement of a U.S.-UK trade agreement and the resumption of high-level economic and trade talks between China and the U.S. helped boost global market sentiment. The U.S. Dollar Index dipped slightly, and the yield on 10-year U.S. Treasuries declined, creating a favorable window for risk assets to rise.
As a prototypical "beta asset" in the crypto market, Ethereum is highly sensitive to shifts in market risk appetite. When sentiment turns positive, ETH is often the first to move.
2. Short Squeeze in the Futures Market: Catalyst Accelerating the Rally
While protocol upgrades and macro conditions laid the groundwork for ETH's rebound, the true ignition came from a structural shift in the futures market, classic short squeeze.
Ethereum 3-Month Futures Annualized Premium
Source: laevitas.ch
Starting May 8, the ETH futures market experienced a classic short squeeze:
- Within 72 hours, total ETH short liquidations reached $438 million, more than double the $211 million in long liquidations.
- Open interest surged from $21.28 billion to $26.77 billion.
- The perpetual funding rate climbed from 0.10% to 0.15%, signaling strong bullish dominance.
The rapid price rise forced short sellers to close positions, triggering more buy pressure and fueling a feedback loop of rising prices and further short liquidations. This "short squeeze spiral" significantly amplified the momentum behind the rally.
3. On-Chain Whale Accumulation: Underlying Support for Long-Term Signals
While technical upgrades and short-term market position shifts lit the spark, the actions of "smart money" are what gave this rally lasting significance.
According to data from on-chain analytics platform Glassnode, addresses holding more than 10,000 ETH began net accumulating in late April and have steadily increased their positions since. As of May 10, these large holders collectively control 40.75 million ETH, the highest level since March 2025.
Notably, these whale addresses typically represent institutions, market makers, and major funds with access to more accurate and timely information. Their continued accumulation is widely interpreted as a sign of long-term bullish sentiment for ETH. Additional on-chain data reveals a decline in large holder transfer activity, suggesting that these funds are entering a phase of accumulation and long-term holding, rather than short-term speculation.
4. Brewing Market Expectations: ETFs, Staking, and Ecosystem Momentum
This rally is also seen as a prelude to a broader "recovery in sentiment," with several powerful catalysts continuing to fuel market expectations:
4.1 Ethereum Spot ETF Staking Expectations Continue to Rise
One of the most transformative developments is unfolding in the ETF space. BlackRock, the world's largest asset manager, recently submitted a proposal to the U.S. SEC seeking approval to incorporate staking into Ethereum spot ETFs, effectively allowing investors to earn staking rewards through ETF holdings.
- If approved, the Ethereum spot ETF could generate an estimated 3.2% annual yield (based on current staking returns).
- Investors would benefit from both ETH capital appreciation and passive income.
- The ETF would evolve from a pure price exposure tool into an income-generating asset, similar to bonds or REITs.
- This structure could attract significant institutional capital looking for long-term ETH exposure.
Robert Mitchnick, Head of Digital Assets at BlackRock noted, "The absence of a staking mechanism has been the main reason for subdued demand for Ethereum ETFs. Adding a yield component could significantly boost interest from traditional investors."
4.2 Wall Street is Reshaping ETH Valuation Models
If staking-enabled ETFs are eventually approved, it will fundamentally change how traditional institutions view Ethereum, not just as a speculative asset, but as a compound financial asset with cash flow, a deflationary mechanism, and an ecosystem moat.
This shift could lead to an upgrade in capital structure and bring ETH closer to traditional valuation frameworks, accelerating its entry into the institutional mainstream.
5. ETH Price Prediction: Is ETH Targeting $3,000?
Ethereum's 72-hour rally not only brought it back to the center of market attention, but also signaled a critical shift: as the BTC price stabilizes, capital is beginning to flow toward ETH and quality altcoins.
This surge wasn’t driven by a single event, it was the result of a confluence of factors: technological progress through protocol upgrades, structural shifts in the derivatives market, on-chain whale activity, and improving macro conditions.
Industry analysts suggest that whether ETH can break through the key psychological level of $3,000 in the coming weeks will depend on several variables:
- Increased developer activity following the Pectra upgrade
- Continued accumulation by whales and sustained bullish on-chain data
- Developments in U.S. regulatory stance and Ethereum ETF progress
- Shifts in Federal Reserve policy and global risk appetite
What is clear is Ethereum is evolving from a "tech platform" into a core asset of capital consensus and macro strategy. The story of ETH is only just beginning.
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