Digital assets saw intense turbulence on Friday as a fresh wave of forced position closures drove a sharp, rapid rally, with attention turning to the world's second-largest cryptocurrency after Bitcoin led a similar squeeze last month.

Data reveals that over $300 million in Ethereum short positions were wiped out within a 24-hour window, fueling an intraday spike of 8.3%—the largest single-day jump in three weeks. Amid a heavy calendar of U.S. economic releases and cooling oil prices, most digital currencies climbed quickly, though Bitcoin's advance lagged at under 4%. Both major coins later retreated from their session peaks.

This latest episode mirrors the late-August volatility when Bitcoin's sudden surge produced the biggest short squeeze on record since tracking began in 2021. This time, however, Ethereum became the focal point for leveraged positioning, shifting away from the typical pattern where Bitcoin leads crypto deleveraging.

Coinglass figures show that Ethereum shorts accounted for over $300 million in liquidations in the past day, while Bitcoin saw roughly $212 million. Cumulative long and short liquidations across the entire digital asset market reached approximately $668 million, marking one of the highest levels since last month's record Bitcoin flush.

Adam McCarthy, research head at trading firm LO:TECH, attributed part of the upside to short covering. He noted that bearish traders continued paying funding fees to hold positions during Ethereum's initial 8% climb, a factor that amplified the price move. The perpetual futures market, a key venue for leveraged bets, showed particular stress. Funding rates for Ethereum perps had recently turned negative, signaling heavy bearish sentiment where shorts pay longs to maintain exposure. When prices jumped, these leveraged shorts were forced to buy back, generating additional upward pressure in a textbook short squeeze.

On Binance alone, roughly $76 million in Ethereum positions were liquidated over 24 hours, most of which stemmed from closed short positions, according to McCarthy. Whether this rapid advance can evolve into a sustained trend remains uncertain, however. Analysts suggest the sudden rally reflects speculative flows and position adjustments rather than a meaningful improvement in real demand.

Since the August surge and subsequent forced deleveraging, many traders have stepped to the sidelines due to a lack of clear catalysts, leaving the market in a rangebound phase. When positioning tilts heavily to one side, even minor price moves can trigger cascading liquidations that quickly exaggerate short-term swings. Lacie Zhang, research analyst at Bitget Wallet, described the recent consolidation as "more like a pause after momentum faded than a confirmed structural breakdown."

Notably, the liquidation landscape shifted after Ethereum's sharp intraday rise. As prices pulled back from highs, the earlier wave of short-driven forced closures slowed and briefly flipped toward long liquidations, underscoring just how volatile the crypto market remains.