Ethereum rose more than 40% in three days. What happened?

Written by: Chen Ming, Securities China

Cryptocurrency, collective movement!

In recent days, the price of cryptocurrencies has risen sharply. Among them, Ethereum (ETH) has performed the strongest, with an increase of more than 40% in 72 hours, and its price once approached $2,600. In addition, cryptocurrencies such as Bitcoin, XRP, BNB, Solana, Dogecoin, and Cardano have also seen good growth.

Some analysts pointed out that the recent collective rise of cryptocurrencies is related to the easing of trade tensions, and the reason why Ethereum leads the rise is related to the technical upgrade of the currency.

Ethereum rose more than 40% in three days

In the past three days, Ethereum has seen significant fluctuations, with its price soaring from US$1,811 to US$2,597.68, with the highest increase reaching 43%, significantly outperforming other large digital currency assets such as Bitcoin.

As of press time, the price of Ethereum fluctuated around $2,540, with a cumulative increase of 39.62% in 7 days; Bitcoin fluctuated around $104,000, with a cumulative increase of 8.52% in 7 days. In addition, in the past 7 days, Solana's cumulative increase exceeded 21%, BNB increased by more than 10%, Cardano increased by more than 15%, and Dogecoin increased by more than 37%.

The above data shows that Ethereum has led a broad rebound in cryptocurrencies and is on track for its biggest weekly gain since 2021, boosted by easing global trade tensions and optimism about network upgrades.

Ethereum's rebound also reflects investors' renewed attention to Ethereum's ongoing technical upgrades. On May 7, Ethereum successfully implemented the Pectra upgrade, introducing a series of key technical improvements. The upgrade introduced important improvements including a higher staking limit and account abstraction (EIP-7702 standard), which significantly enhanced the usability and flexibility of the Ethereum network. The technology can also reduce network fees. This technical upgrade not only brings substantial functional improvements, but also injects new confidence into investors, becoming an important technical foundation for this round of increases. These initiatives by Ethereum are also seen as necessary to resist competition from fast-growing competitors such as Solana.

In addition, the "short squeeze" market also boosted Ethereum's rebound. Since May 8, the Ethereum futures market has staged a typical short squeeze drama. Data shows that since May 8, short positions in the Ethereum futures market have been liquidated on a large scale, with a liquidation amount of up to US$438 million, far exceeding the long liquidation amount of US$211 million in the same period. The sharp rise in prices forced short traders to buy Ethereum to cover their positions, further pushing up the price of the currency, forming a typical "short squeeze" upward spiral.

At the same time, the total value of Ethereum open interest surged from $21.28 billion on May 8 to $26.77 billion on May 10, and the weekly funding rate of Ethereum perpetual futures also rose from 0.10% to 0.15%. These two indicators together show that more traders are entering the market and opening new positions, and long traders are willing to pay extra fees to maintain their positions, further confirming the bullish sentiment of Ethereum futures traders.

Trade tensions ease

From a macro perspective, the easing of global trade tensions is an important reason for the current round of cryptocurrency strength. According to CCTV News, on May 8 local time, the United States and the United Kingdom reached a new trade agreement to partially withdraw tariffs in specific areas and further expand market access for both sides' products. In addition, on the morning of May 10 local time, high-level economic and trade talks between China and the United States began in Geneva, Switzerland.

The above news significantly boosted the market's risk appetite and created a positive atmosphere for the crypto asset market, including Bitcoin and Ethereum. On May 8, Bitcoin broke through the $100,000 mark, the first time it has broken this psychological barrier since February this year. Some analysts said that this reflects that investors' overall demand for risky assets is recovering. At the same time, U.S. stocks have continued to rebound from their April lows, and market risk appetite has clearly increased.

Trenchev, co-founder of cryptocurrency trading platform Nexo, said: "Bitcoin's performance on Thursday not only returned to the $100,000 mark for the first time in three months, but also once again proved Bitcoin's status as the 'ultimate rebound asset' and reflected the boost to market sentiment from improved U.S. trade prospects." Trenchev also said: "Bitcoin is supported by the Trump administration's friendly attitude towards cryptocurrencies, and spot ETF investors are also continuing to buy." He added that recent market uncertainties have instead boosted Bitcoin's rise as investors have begun to doubt the dollar's safe-haven status, which may continue to support Bitcoin's trend.

Thomas Perfumo, global economist at cryptocurrency exchange Kraken, noted: “Bitcoin’s re-entry into the six-digit mark comes at a time when risk sentiment in global markets is recovering. The stock market is performing strongly, investors’ willingness to allocate risky assets is increasing, and this recovery of ‘animal spirits’ has quickly spread to the cryptocurrency sector.”

Recently, another major event in the cryptocurrency circle was that Coinbase spent $2.9 billion to acquire Deribit, becoming the world's largest digital currency derivatives exchange.

According to foreign media reports on Thursday, the US cryptocurrency exchange Coinbase has agreed to acquire Deribit, the world's largest crypto derivatives exchange, for $2.9 billion, setting a record for the largest merger and acquisition in the history of the digital market. The transaction structure shows that Coinbase will pay $700 million in cash and the rest in the form of stock. Coinbase said that this acquisition will accelerate the company's global derivatives strategy.

The acquisition marks Coinbase's most ambitious move yet into the lucrative cryptocurrency derivatives market. Last year, Deribit's total trading volume nearly doubled to nearly $1.2 trillion. Cantor analyst Brett Knoblauch said: "This is the largest cryptocurrency M&A transaction in history, and we think this is an A+ acquisition for Coinbase."