Ether rocketed 14% to $4,817 on Friday, nearly touching its 2021 all-time high after Federal Reserve Chair Jerome Powell hinted at September rate cuts during his Jackson Hole address. The surge triggered $120 million in short liquidations as crypto markets returned to risk-on mode.
Ether just delivered its most explosive move in weeks, rocketing 14% to $4,817 after Federal Reserve Chair Jerome Powell essentially gave crypto traders everything they wanted to hear. The second-largest cryptocurrency came within striking distance of its 2021 all-time high of $4,866, erasing this week's brutal selloff that had dragged ETH as low as $4,000 on Tuesday.
The catalyst came during Powell's highly anticipated Jackson Hole address, where he delivered his clearest signal yet that rate cuts are incoming. "With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance," Powell said, effectively green-lighting a September rate cut that sent risk assets soaring.
"Traders seem to have been caught completely off-sides by Powell's dovish comments today," Jordi Alexander, CEO at crypto trading firm Selini Capital, told CNBC. The market positioning had been decidedly risk-off in recent sessions, with massive outflows from both crypto and tech stocks. "Today's setting up of a September rate cut is causing a panicked repositioning, which could continue through the illiquid weekend as shorts get squeezed."
The numbers tell the story of that squeeze in vivid detail. According to CoinGlass, ETH saw approximately $120 million in short liquidations within just one hour of Powell's remarks. When leveraged traders betting against ether get caught wrong-footed, they're forced to buy ETH back to close their positions, creating a feedback loop that pushes prices even higher and triggers more liquidations.
Bitcoin followed suit with a more measured 4% gain to $116,820, but it was ether that stole the show. The ETH surge reflects crypto's heightened sensitivity to Federal Reserve policy, as lower rates typically drive investors toward riskier assets with higher potential returns.
The rally instantly breathed life back into crypto-focused stocks that had been hammered this week during the broader tech rotation. Coinbase shares advanced 6%, while stablecoin issuer Circle gained 7%. Companies that accumulate ether saw even bigger moves - Bitmine Immersion and SharpLink Gaming jumped 14% and 12% respectively.
Not everyone benefited from the rally. ETHzilla, the Peter Thiel-backed ether treasury company, tumbled 30% after filing to offer up to 74.8 million shares for resale - a move that spooked investors even as the underlying asset surged.
The institutional picture remains complex. Ether ETFs saw $287.6 million in inflows Thursday, snapping a four-day outflow streak, according to crypto research platform SoSoValue. But those funds are still on pace for their first week of net outflows since May 9, with $578.9 million heading for the exits - potentially the biggest weekly outflow on record.
"Momentum is back on the menu with the administration and the Fed seemingly aligned on easing," Alexander noted. The comment reflects growing optimism that both monetary and regulatory headwinds for crypto may be shifting favorably.
The timing couldn't be more critical for ethereum's ecosystem, which has been working to regain momentum after months of underperformance relative to bitcoin. Friday's surge puts ETH within 1% of its all-time high, setting up a potential breakout that could attract fresh institutional interest.
What happens next largely depends on whether Powell's dovish pivot translates into sustained risk appetite or if this proves to be another false dawn for crypto markets.
Friday's explosive ether rally showcases crypto's lightning-fast response to Federal Reserve policy shifts. With ETH just 1% away from its all-time high and Powell signaling September rate cuts, the stage is set for either a major breakout or another false start. The $120 million in short liquidations suggests traders were positioned for continued weakness, making this reversal all the more dramatic. Whether this momentum sustains depends on follow-through from both institutional flows and Powell delivering on his dovish hints.
