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

Written by: Chen Ming, Securities China

Cryptocurrency, collective movement!

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

Some analysts pointed out that the recent collective rise in cryptocurrencies is related to the easing of trade tensions. The reason why Ethereum led the rise was related to the technological upgrades carried out by the currency.

Ethereum rose by more than 40% in three days

In the past three days, Ethereum has changed dramatically, and its price once soared from $1,811 to $2,597.68, with a maximum increase of 43%, significantly outperforming other large digital currency assets such as Bitcoin.

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

The above data shows that Ethereum has led a wide rebound in cryptocurrencies, and Ethereum is expected to hit its largest single-week gain since 2021, boosted by easing global trade tensions and optimism about network escalation.

Ethereum’s rebound also reflects investors’ renewed focus on the ongoing technological upgrades of Ethereum. On May 7, Ethereum successfully implemented the Pectra upgrade and introduced a series of key technological improvements. The upgrade introduces important improvements including higher staking caps, account abstraction (EIP-7702 standard), significantly enhancing the ease of use and flexibility of the Ethereum network, which also reduces network costs. This technological upgrade not only brings substantial functional improvements, but also injects new confidence into investors and becomes an important technical basis for this round of rise. These moves by Ethereum are also seen as necessary to resist competition from fast-growing competitors such as Solana.

In addition, the "short squeeze" market has also boosted the rebound of Ethereum. 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 closed on a large scale, with the liquidation amount reaching US$438 million, far exceeding the long liquidation amount of US$211 million during the same period. The sharp rise in prices forced short traders to buy Ethereum to cover positions, further pushing up the currency price and forming a typical "short squeeze" spiral.

Meanwhile, the total value of Ethereum open contracts surged from $21.28 billion on May 8 to $26.77 billion on May 10, and the weekly financing rate of Ethereum perpetual futures also rose from 0.10% to 0.15%. Together, these two indicators indicate that more traders are entering the market and opening new positions, and long traders are willing to pay additional fees to maintain 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 strengthening of cryptocurrencies in this round. According to CCTV News, on May 8 local time, the United States and the United Kingdom reached a new trade agreement, partially withdrawing tariffs in specific areas, further expanding market access to products from both sides. In addition, on the morning of May 10 local time, high-level Sino-US economic and trade talks began in Geneva, Switzerland.

The above news significantly boosted market 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 since February this year to break through this psychological barrier. Some analysts said this reflects that investors' overall demand for risky assets is recovering. At the same time, US stocks have continued to rebound from April lows, and market risk appetite has increased significantly.

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

Thomas Perfumo, a global economist at cryptocurrency exchange Kraken, noted: "Bitcoin re-establishes the six-digit mark, as global market risk sentiment recovers. Stock markets are performing strongly, investors' willingness to allocate risky assets is increasing, and this recovery's 'animal spirit' has spread rapidly into the cryptocurrency space."

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

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

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