ETH Surges Toward $4,000: Analysis of Its Sustained Rally
Over the past month, Ethereum (ETH) has delivered what can only be described as a “phenomenal” performance. From under $1,800 in late May, it soared all the way up to the $3,800 range, peaking at $3,832, with a 24-hour gain of up to 6.64% and a maximum increase of more than 111%. Market sentiment shifted from cold to hot, and investors seem to have returned to the frenzy of the 2021 bull run.
So, why has Ethereum been able to climb continuously in such a short time and approach the $4,000 threshold? Behind this are not only large-scale short squeezes, but also the combined effect of global macro policies, institutional support, and a rediscovery of Ethereum’s ecosystem value.
This article will comprehensively analyze the core logic behind Ethereum’s recent surge, combining market dynamics, on-chain data, and capital trends.
- Short Squeeze: An Unprecedented Chain Reaction of Liquidations
If there’s one catalyst for this rally, it’s undoubtedly the short squeeze. According to Zerohedge data, at the beginning of July, Ethereum’s net leveraged short positions hit an all-time high, about 25% higher than levels seen in February 2025. A large number of investors bet on ETH to continue falling, but they didn’t anticipate the market would strike back.
As ETH began to rebound, these highly leveraged shorts were forced to close, triggering a domino effect. In just three weeks, Ethereum’s market cap surged by $150 billion. That’s an incredibly alarming figure. On-chain data shows that in the past seven days alone, over $800 million in ETH short positions were liquidated.
If ETH rises another 10%, over $1 billion in short positions will face liquidation pressure. This “squeeze” effect sent the market into a panic-buying phase, accelerating the price surge.
In simple terms, this is not just a technical rebound, but a “market repricing.” When short positions are concentrated in institutional hands, a misjudgment in direction can have exponential consequences. Ethereum’s surge is a direct result of hitting this market vulnerability.
- Trump and Institutions Double Down: Policy Dividends Unfolding
Aside from internal market dynamics, policy news is another key driver of this rally. The most noteworthy are the recent bullish signals from the Trump administration toward the crypto market:
1)World Liberty Financial Adds ETH
According to on-chain tracking data, Trump-founded World Liberty Financial purchased $5 million worth of Ethereum in the past 24 hours. Such actions from “top brass” directly bolster market confidence.
2)401(k) Pension Plans to Include Crypto Assets
A recent Financial Times report revealed that Trump plans to issue an executive order allowing 401(k) pension plans to invest in cryptocurrencies, gold, and private equity. The U.S. 401(k) fund is worth a massive $8.7 trillion, while the total market cap of crypto is just $3.8 trillion. Once capital access opens up, it could deliver a capital inflow effect comparable to that of Bitcoin ETFs.
3)Bipartisan Legislative Support for Crypto
The U.S. House of Representatives passed the Clarity Act, Genius Act, and Anti-CBDC Act, significantly boosting the legitimacy and market status of cryptocurrencies.
- What Does This Mean?
Policy support has moved from verbal endorsements to concrete action. Whether it’s pension fund investments or regulatory relaxation for stablecoins and tokenized assets, this indicates that the crypto market is shifting from “fringe finance” to “mainstream assets.”
ETH Ecosystem Value Rediscovered: Staking and DeFi Rebound
Compared to Bitcoin’s “digital gold” narrative, Ethereum’s value lies more in its ecosystem and technological innovation. The recent ETH price surge is closely tied to the renewed recognition of its foundational logic.
1)PoS Staking Offers “Crypto Treasury Bond” Yields
Since Ethereum’s transition to Proof of Stake (PoS), staking yields have stabilized around 3%-4% annually. For enterprises or large capital investors, this stable yield is equivalent to a “crypto bond,” offering a better risk-return profile than many traditional assets.
1)Layer 2 and DeFi Explode
Transaction volumes on L2 networks like Arbitrum and Optimism have repeatedly hit new highs. DeFi protocols like Aave and Lido have seen their TVL rise sharply, with ETH serving as the core collateral asset for these ecosystems.
3)Corporate Capital Floods into ETH
Four U.S.-listed companies — SharpLink Gaming, Bitmine Immersion Tech, Bit Digital, and BTCS — have triggered an “ETH MicroStrategy” wave through large-scale ETH purchases and staking profits.
SharpLink Gaming holds 358,000 ETH (approx. $1.28 billion), surpassing the Ethereum Foundation.
Bitmine holds 300,700 ETH, making it one of the most watched “ETH gamblers” in capital markets.
4)Why Choose ETH Over BTC?
Because ETH is no longer just a speculative asset. It’s a “financial platform token” that generates continuous cash flow through staking and restaking. It resembles a growth stock.
Can ETH Break Through $4,000?
Currently, ETH has broken through $3,800, peaking at $3,832, just a step away from $4,000. The market generally believes that $4,000 is not only a psychological threshold but also a concentrated stop-loss point for many shorts. Once breached, a new round of short squeezes could be triggered.
Short-Term Drivers:
Continued short liquidation releases upward momentum.
The 401(k) policy news continues to ferment.
Technical indicators show strong support at $3,700.
Mid-to-Long-Term Logic:
ETH staking rate continues to rise, now exceeding 25% of total supply.
The U.S. Dollar Index (DXY) has fallen 10% year-to-date, improving global liquidity for risk assets.
Bitcoin has broken past $120,000, giving ETH room to catch up.
If Trump signs the pension executive order and institutional capital continues to accumulate, ETH has a high probability of surpassing $4,000 in August — possibly even targeting $4,500.
Risk Factors: Is the Market Overheating?
Although current sentiment is high, investors should remain cautious.
Over-Leveraging Risk: After massive short liquidations, long positions are also rising rapidly. A market correction could trigger long-side cascades.
Policy Risk: While Trump supports the crypto market, the SEC and Federal Reserve still pose policy uncertainties. Crypto taxation issues could bring new regulatory pressure.
ETH Ecosystem Security: The PoS staking mechanism still carries potential technical vulnerabilities, and smart contract attacks remain possible.
Final Thoughts
Ethereum’s surge is not just a price fluctuation but a dual revolution in finance and technology.
It is transforming from a speculative tool to a “digital asset platform.”
It is backed by global policy and capital, entering an institutional “golden era.”
Its competition with Bitcoin is evolving into an ecosystem battle, not just a price war.
If Bitcoin is “digital gold,” then Ethereum is “digital financial infrastructure.” As the $4,000 mark nears, ETH is not only challenging a new price high but also redefining the structure of the crypto market.
Disclaimer: The content of this article is for reference only and does not constitute any investment advice. Investors should evaluate crypto investments based on their own risk tolerance and investment goals and should not blindly follow the trend.
