- ETH’s $2.7K breakout triggered a short squeeze, but rising exchange reserves signal weakening momentum
- Ethereum’s decoupling from Bitcoin raises concerns about sustainability, with L2s and retail participation faltering
Ethereum’s [ETH] break above the $2,700 mark shocked the market, triggering over $50 million in short liquidations on Binance alone.
But beneath the surface, there’s something a bit more complex: rising Exchange Reserves and notable whale outflows suggest that the bullish momentum may be losing steam.
At the same time, Ethereum’s recent price decoupling from Bitcoin – once seen as a sign of growing strength – now raises fresh concerns about sustainability and direction for the broader Ethereum ecosystem.
Short squeeze ignites as ETH breaks $2.7K
Ethereum’s surge past the $2,700 resistance level triggered a sharp liquidation event on Binance, wiping out over $50 million in short positions, according to CryptoQuant data.
Source: CryptoQuant
This zone, highlighted as a liquidity cluster on the Liquidation Delta chart, became a magnet for stop-loss orders as ETH pierced through.
Source: CryptoQuant
However, that squeeze was immediately followed by over 144,000 ETH flowing into Derivatives Exchange Reserves—a red flag. Such inflows typically precede renewed short positioning, not trend continuation.
While the bulls briefly claimed victory, the rapid inflows and heatmap pressure suggest caution may be warranted amid the initial euphoria.
Ethereum-Bitcoin correlation collapses
For years, Ethereum and Bitcoin moved in near-lockstep, often sharing a correlation above 0.7. But that relationship has nearly evaporated.
According to CryptoQuant, ETH’s 1-year Correlation with BTC plunged to just 0.05 as of the 22nd of May – down from 0.63 at the start of the year.
Source: Cryptoquant
This sudden decoupling disrupts one of the crypto market’s most consistent patterns, forcing a reassessment of traditional portfolio strategies.
More critically, it coincides with ETH’s relative underperformance during Bitcoin’s rally.
Decoupling dampens momentum
Ethereum’s divergence from Bitcoin is eroding market confidence. Without the tailwind of synchronized BTC rallies, Ethereum’s ecosystem is struggling to sustain growth.
Retail participation appears to be thinning, and leading L2s like Optimism, Arbitrum, and Polygon have failed to gain traction in 2025. Forecasting models that once hinged on Bitcoin’s directionality are losing predictive power.
Ethereum may be evolving into a more autonomous asset driven by internal fundamentals, but that independence risks isolating it during bull cycles.
For now, the decoupling seems to be more just wind than evolution.
