Ethereum Short Sellers Face Risk of Squeeze as Binance Coin Surges Ahead of EDU Launch

Ethereum (ETH), the second-largest cryptocurrency by market capitalization, is facing a wave of short-selling pressure as traders anticipate a possible correction after its recent rally. However, this bearish sentiment may backfire if Ethereum continues to climb higher and triggers a short squeeze.

According to data from Coinglass, the majority of market participants on Binance are betting against Ethereum, with the short side accounting for 56.7% of the total open interest as of October 27. This is a significant increase from the previous day, when the short side was only 46.9%.

One of the reasons why traders are shorting Ethereum is the overbought condition of the market. Ethereum has gained more than 20% in the past week, breaking above the $4,000 resistance level and reaching a new three-month high of $4,370 on October 26. The Relative Strength Index (RSI), a technical indicator that measures the momentum of price movements, shows that Ethereum is currently in the overbought zone, indicating a potential reversal.

Another reason why traders are shorting Ethereum is the upcoming launch of Open Campus (EDU) on Binance Launchpad, the platform that hosts initial coin offerings (ICOs) for promising projects. Open Campus is a Web 3.0 project that aims to create a decentralized platform for education content creation and monetization. The project has partnered with Tiny Tap, a user-generated app with over 9 million users, to integrate its EDU token into the app.

The EDU token sale will take place on April 28, 2023, following a five-day period of recording user balances of Binance Coin (BNB), the native token of Binance. Users who hold BNB will be eligible to participate in the token sale and receive EDU tokens based on their average BNB balance during the recording period.

This means that users who want to join the EDU token sale have an incentive to buy and hold BNB until April 28. This could boost the demand and price of BNB, which is already one of the best-performing cryptocurrencies this year. BNB has surged more than 1,300% year-to-date, reaching an all-time high of $690 on May 10. It is currently trading at $530, up 8% in the past week.

As BNB rises in value, it could also put pressure on Ethereum, which competes with Binance Smart Chain (BSC), the blockchain network that powers BNB and hosts many decentralized applications (DApps). BSC has been gaining popularity among users and developers due to its low fees and high scalability compared to Ethereum. According to DappRadar, BSC currently has over 2,000 DApps with more than 1 million daily active users and over $20 billion in total value locked.

Therefore, traders who are shorting Ethereum may be betting on a scenario where BNB outperforms ETH and causes a divergence in their price movements. However, this strategy could also backfire if Ethereum proves its resilience and maintains its upward momentum. If Ethereum breaks above its all-time high of $4,384 and attracts more buying support from institutional and retail investors, it could trigger a short squeeze and force many short sellers to close their positions at a loss.

A short squeeze is a situation where a rapid increase in the price of an asset causes a large number of short sellers to cover their positions by buying back the asset. This creates a positive feedback loop that pushes the price even higher and squeezes more short sellers out of the market. A short squeeze can result in a sharp and explosive rally that catches many traders off guard.

Therefore, traders who are shorting Ethereum should be careful and monitor the market closely. While Ethereum may face some resistance and volatility in the near term, it could also surprise many skeptics and continue its bullish trend. Ethereum has many fundamental factors that support its long-term growth, such as its ongoing transition to proof-of-stake (PoS), its leading role in the decentralized finance (DeFi) and non-fungible token (NFT) sectors, and its innovation in scaling solutions and layer-2 technologies.

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