Ethereum just delivered its biggest single-day rally in months, soaring 12% to $4,738.91 as Federal Reserve Chair Jerome Powell's Jackson Hole speech triggered a massive short squeeze and sent crypto traders scrambling to reverse their bearish bets. The surge puts ether within striking distance of its 2021 all-time high of $4,866, marking a dramatic reversal from Tuesday's $4,000 lows.
Ethereum just exploded higher in what traders are calling a textbook short squeeze, with the world's second-largest cryptocurrency rocketing 12% to $4,738.91 after Federal Reserve Chair Jerome Powell's surprise dovish pivot at Jackson Hole. The dramatic reversal came as Powell declared that "the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance," signaling September rate cuts are now on the table.
The timing couldn't have been more brutal for bearish traders. According to CoinGlass, ether saw approximately $120 million in short liquidations within a single hour of Powell's remarks, creating a cascading effect as leveraged positions unwound. "Traders seem to have been caught completely off-sides by Powell's dovish comments today," Selini Capital CEO Jordi Alexander told CNBC via the original report. "The market positioning in recent sessions has seen clear risk-off moves in assets like crypto and tech, and today's setting up of a September rate cut is causing a panicked repositioning."
The liquidation mechanics tell the story of a market caught wrong-footed. When traders short ether with leverage and prices surge, they're forced to buy ETH back to close positions, creating additional buying pressure that pushes prices even higher. This feedback loop turned Powell's policy hint into a crypto market earthquake, with Bitcoin also climbing 3% to $116,191.09 in sympathy.
Crypto treasury stocks, which had been hammered earlier this week during the tech rotation, bounced hard alongside the underlying assets. Coinbase advanced 6%, while stablecoin issuer Circle gained 7%. Even more dramatic moves hit the smaller treasury plays: Bitmine Immersion and SharpLink Gaming jumped 14% and 12% respectively, while Solana-focused DeFi Development surged 19%.
The outlier was ETHzilla, Peter Thiel's ethereum treasury company, which tumbled 30% after filing to offer up to 74.8 million shares for resale. The dilution announcement couldn't have come at a worse time, highlighting how quickly sentiment can shift in leveraged crypto proxy stocks.
The institutional money flow tells a more nuanced story. Ether ETFs recorded $287.6 million in inflows Thursday according to SoSoValue, snapping a four-day outflow streak. Yet those funds remain on track for their worst week since launch, with net outflows of $578.9 million. Bitcoin ETFs face even steeper headwinds, logging $1.15 billion in weekly outflows - their largest since February.
"Momentum is back on the menu with the administration and the Fed seemingly aligned on easing," Alexander added, capturing the broader shift in market psychology. The crypto surge reflects a broader risk-on rotation as investors price in a more dovish Fed stance. Powell's carefully worded remarks about policy adjustments have traders betting that the central bank's restrictive stance may be nearing an end.
For ethereum specifically, Friday's surge brings the cryptocurrency tantalizingly close to its November 2021 peak of $4,866.01. Just last week, ether had briefly threatened that all-time high before retreating to Tuesday's $4,000 lows amid the broader tech selloff. The 18% swing from Tuesday's lows to Friday's highs underscores the heightened volatility that continues to define crypto markets.
Powell's dovish pivot has fundamentally shifted the crypto landscape, with ethereum leading a risk-on charge that caught short sellers completely off guard. With September rate cuts now in play and $120 million in liquidations providing technical momentum, Friday's surge represents more than just a bounce - it's a warning shot to anyone betting against crypto in an easing cycle. The question now isn't whether ether will test new highs, but how quickly institutional flows will follow retail's sudden bullish reversal.
