Trader Doubles Down on $171M Ethereum Short as $3.6K Liquidation Level Looms

A smart trader’s $171M ETH short signals correction risk, with liquidation set at $3,634 amid $10M+ in unrealized gains.

Exchange netflows flipped from heavy outflows to $150M inflows, leading to Ethereum’s drop from $4K to around $3,200.

ETH holds above $3K despite selling pressure, retesting a 3 year downtrend as sentiment remains divided on the next direction.

Ethereum’s recent rally from $2,400 to nearly $4,000 within three weeks has taken a sharp turn. A high volume short position has now emerged, with one smart trader growing his bet to 50,000 ETH, worth roughly $171.7 million

According to Lookonchain, the trader holds an unrealized profit above $10 million and has set a liquidation level at $3,634. The size and direction of this position show growing anticipation of a deeper correction in Ethereum’s price.

Heavy Net Outflows Fueled the Rally to $4K

ETH price began surging on July 9, building momentum as outflows from exchanges increased sharply. Large red bars on the netflow data, indicating funds exiting exchanges, marked a phase of investor accumulation. This trend continued until July 26.

From July 17 to 24, Ethereum saw several outflows exceeding $100 million. This stretch coincided with ETH’s rise toward $3,900–$4,000. This phase aligned with rising market confidence as fewer coins remained on exchanges, limiting immediate selling pressure.

ETH Spot Inflow/Outflow chart, Source: Coinglass

However, this momentum soon faded. Around July 28, net inflows began to appear, peaking with a $150 million spike. This shift indicated that major holders were moving assets back to exchanges, potentially preparing to sell. ETH’s price then dropped to around $3,200.

Inflows Increase as Correction Begins

The appearance of green netflow bars after July 28 confirmed rising exchange balances. These inflows, particularly those above $100 million, often precede major price moves.

This trend matched Ethereum’s reversal from the $3,900 region. As the price fell, the market began registering inflows that indicated selling pressure. Despite the decline, some outflows remained visible, suggesting that longer term holders were not completely exiting.

Such mixed netflows create an uncertain environment. However, Ethereum holding above $3,000 despite the inflows suggests there’s still underlying demand or strong hands holding through volatility.

ETH Retests Downtrend as Sentiment Splits

According to Merlijn The Trader, ETH dipped below $2,000 earlier, leading to a bear trap that liquidated late short sellers. The asset has since rebounded and is now retesting a 3 year downtrend as a potential support level.

This price level could act as a major pivot, with sentiment split between further downside and a strong rebound. Meanwhile, the large ETH short position, still active and highly profitable, is a key factor, especially as its $3,634 liquidation level approaches.

Overall, Ethereum’s rally was largely driven by sharp exchange outflows. The correction began after a $150 million inflow wave, suggesting strategic selling. One trader’s growing short, combined with rising inflows, shows ongoing tension between bullish structure and downside pressure.

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