In a dramatic shift, hedge funds look like ramping up quick positions in Ethereum at a price not seen earlier than, sparking questions on whether or not the second‐largest cryptocurrency by market capitalization might be going through troubled waters—or if one thing else is at play.
In accordance with famend analysts from the Kobeissi Letter (@KobeissiLetter), quick positioning in Ethereum “is now up +40% in ONE WEEK and +500% since November 2024.” Their findings, shared on X, argue that “by no means in historical past have Wall Avenue hedge funds been so wanting Ethereum, and it’s not even shut,” prompting the query: “What do hedge funds know is coming?”
Huge Ethereum Brief Squeeze Coming?
The Kobeissi Letter’s thread highlights an excessive divergence between Ethereum’s worth motion and futures positioning amongst hedge funds. They level to an particularly unstable interval on February 2, when Ethereum plunged by 37% in simply 60 hours as commerce conflict headlines emerged, wiping out greater than a trillion {dollars} from the crypto market “in HOURS.”
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The analysts notice how ETH inflows had been strong throughout December 2024—whilst hedge funds had been reportedly boosting quick publicity. In accordance with the Kobeissi Letter: “In simply 3 weeks, ETH noticed +$2 billion of recent funds with a document breaking weekly influx of +$854 million. Nonetheless, hedge funds are betting ETH’s surge and limiting breakouts.”
Additionally they underscore spikes in Ethereum buying and selling quantity, notably on January 21 (Inauguration Day) and across the February 3 crash. Regardless of the traditionally excessive inflows, Ethereum’s worth has “didn’t recuperate the hole decrease whilst one week has handed,” and at present trades “~45% beneath its document excessive set in November 2021.”
One of many greatest unknowns stays why hedge funds are so devoted to shorting ETH. The analysts write: “Potential causes vary from market manipulation, to innocent crypto hedges, to bearish outlook on Ethereum itself. Nonetheless, that is relatively unusual because the Trump Administration and new regulators have favored ETH. Largely on account of this excessive positioning, Ethereum has considerably underperformed Bitcoin.”
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The Kobeissi Letter concludes its thread by drawing consideration to Bitcoin’s outperformance and poses the query of whether or not a brief squeeze might be within the making: Might Ethereum be organising for a brief squeeze? This excessive positioning means massive swings just like the one on February third will probably be extra frequent. For the reason that begin of 2024, Bitcoin is up ~12 TIMES as a lot as Ethereum. Is a short squeeze set to shut this hole?”
Glassnode’s CryptoVizArt Fires Again
Not everybody within the crypto analytics sphere is satisfied that the tidal wave of Ethereum quick positions alerts a bearish outlook. Senior researcher at Glassnode, CryptoVizArt.₿ (@CryptoVizArt), took to X to challenge the alarmist takes circulating on social media: “Barchart is screaming, ‘Largest ETH quick in historical past!’ and crypto Twitter is operating round like headless chickens. Critically, when you fell for this clickbait headline, it’s time to up your sport. Let’s set the document straight.”
In an in depth thread, CryptoVizArt factors out that the broadly shared chart on hedge fund quick positions seemingly represents just one subset of the market (e.g., “Leveraged Funds / Hedge Funds/CTAs”) and doesn’t account for different important market individuals resembling asset managers, non‐reportable merchants, and on‐chain holders. They add that comparable “large shorts” had been seen in Bitcoin futures as properly, but BTC outperformed ETH throughout the identical interval.
Moreover, CryptoVizArt emphasizes that CME Ether futures are only one sliver of worldwide crypto derivatives. Liquidity on platforms like Binance, Bybit, OKX, in addition to on‐chain positions and spot markets, supply a broader view than anybody alternate’s information would possibly counsel. “One group’s web quick ≠ your complete market is web quick. Hedge positions ≠ purely bearish bets.”
Their remaining notice: a lot of the positioning might be a part of “non‐directional methods—resembling money‐and‐carry,” that are impartial methods used to lock in arbitrage features and aren’t merely a direct wager towards ETH.
At press time, ETH traded at $2,629.
Featured picture created with DALL.E, chart from TradingView.com