Ethereum Eyes $2,000 as Binance Supply Drops: Short Squeeze Incoming?

Ethereum continues its recovery phase, with the asset now trading above $1,800 after gaining approximately 15.3% over the past two weeks. Despite concerns from investors and a drop in public enthusiasm, ETH seems to have shown resilience..

The asset’s latest movement reflects renewed buying interest, and some on-chain indicators are pointing to potentially bullish momentum ahead. One of those indicators involves the supply of ETH on exchanges.

A recent analysis by Amr Taha, a contributor to CryptoQuant’s QuickTake platform, points to a significant decline in Ethereum’s Exchange Supply Ratio on Binance — a metric that tracks the amount of ETH held on the platform relative to its circulating supply.

According to Taha, this ratio has now reached a multi-week low, signaling that more Ethereum is being pulled off Binance, potentially to cold storage or decentralized finance (DeFi) protocols.

Taha explains that this decline in the exchange supply ratio historically indicates reduced sell-side pressure, as users often withdraw assets when they plan to hold or deploy them in alternative protocols rather than sell.

The development is particularly notable on Binance, which remains the largest crypto exchange by volume and liquidity. As such, changes in its ETH reserves can often reflect broader market sentiment shifts.

To illustrate this trend, Taha points to a similar case in April, when a sharp reduction in ETH’s exchange supply on Binance was followed by a price rally from below $1,700 to roughly $1,950, a 14% move within days.

The analyst suggests the current pattern may be setting the stage for a similar development, especially given what’s happening on the derivatives side of the market.

Heatmaps tracking liquidations indicate the presence of a growing cluster of short positions between $1,900 and $2,000. According to Taha, this layer of aggressive short interest creates a zone of potential upward price movement if those positions are forced to close in a short squeeze.

Particularly, if ETH climbs into that range, the resulting liquidations could amplify upward momentum. In this scenario, the cost to move ETH’s price higher decreases as the available supply on exchanges continues to decline.

Taha notes that the combination of falling exchange balances and rising short interest creates favorable conditions for what he describes as a “liquidity hunt” — a situation where price is pushed to trigger liquidations and capitalize on trapped positions.

With ETH’s current price momentum and the reduction in sell-side resistance, the $1,900 to $2,000 range is increasingly becoming a focal point.

Featured image created with DALL-E, Chart from TradingView