In recent developments, Ethereum is grappling with an unprecedented level of short selling from hedge funds, as futures contracts on the Chicago Mercantile Exchange (CME) hit a new zenith of 11,341, according to the latest chart from ZeroHedge. The sharp rise of bearish bets by a staggering 40% within a week, and a colossal 500% since November 2024, as reported by The Kobeissi Letter, is indeed a matter of concern for Ethereum’s immediate future.
Ethereum’s historical data reveals a noticeable correlation between substantial short positions and ensuing price drops. As a case in point, on Feb. 2, Ethereum witnessed a steep fall, nosediving nearly 37% in a matter of 60 hours in the aftermath of President Trump’s tariff announcement. The analyst from The Kobeissi Letter likened the situation to the flash crash that befell the stock market in 2010, albeit this time, without any significant headlines to cause such a drastic drop. This sudden sell-off led to a staggering $1 trillion being wiped out from the broader crypto market within a few hours.
Intriguingly, the hike in short positions comes in the wake of apparent backing from the Trump administration. Eric Trump’s recent assertion that “it’s a great time to add ETH” temporarily buoyed the prices. However, as per the latest data from CoinGecko, Ethereum’s price hovers around $2,500, marking a 2% dip in the previous 24 hours. Currently, it is trading at a significant 45% below its November 2021 record high.
The year 2024 has seen Bitcoin outperforming Ethereum significantly. Bitcoin has witnessed an impressive 100% surge, leaving Ethereum lagging with a meager 3.5% gain since the year’s onset. This stark contrast has caused Bitcoin’s market cap to expand to six times that of Ethereum’s, a level of dominance last observed in 2020, as per The Kobeissi Letter.
Ethereum’s inability to rebound in line with the recovering crypto market raises questions about the factors fuelling the negative sentiment. Probable causes could include concerns regarding Ethereum’s foundational technology, regulatory ambiguities, and macroeconomic challenges.
The record short position heightens the potential for price volatility. A prolonged downturn would authenticate the bearish outlook. However, the monumental size of the short position also escalates the chances of a short squeeze if positive developments emerge. As such, the future course of Ethereum becomes a captivating saga to watch. The unfolding scenario emphasizes the importance of careful observation and strategic decision making for investors in the ever-volatile crypto market.
