In a dramatic shift, hedge funds seem like ramping up quick positions in Ethereum at a fee not seen earlier than, sparking questions on whether or not the second‐largest cryptocurrency by market capitalization could possibly be dealing with troubled waters—or if one thing else is at play.
Based on 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 Road hedge funds been so in need of 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 value 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 struggle headlines emerged, wiping out greater than a trillion {dollars} from the crypto market “in HOURS.”
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The analysts be aware how ETH inflows had been strong throughout December 2024—at the same time as hedge funds had been reportedly boosting quick publicity. Based on the Kobeissi Letter: “In simply 3 weeks, ETH noticed +$2 billion of latest funds with a document breaking weekly influx of +$854 million. Nonetheless, hedge funds are betting ETH’s surge and limiting breakouts.”
In addition 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 value has “didn’t recuperate the hole decrease at the same time as one week has handed,” and presently 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 slightly unusual because the Trump Administration and new regulators have favored ETH. Largely as a consequence 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 could possibly be within the making: Might Ethereum be organising for a brief squeeze? This excessive positioning means large swings just like the one on February third shall be extra widespread. Because the 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 working round like headless chickens. Critically, in case 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 extensively shared chart on hedge fund quick positions doubtless represents just one subset of the market (e.g., “Leveraged Funds / Hedge Funds/CTAs”) and doesn’t account for different vital market contributors similar to asset managers, non‐reportable merchants, and on‐chain holders. They add that related “huge 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, provide a broader view than anybody trade’s knowledge may recommend. “One group’s web quick ≠ your entire market is web quick. Hedge positions ≠ purely bearish bets.”
Their remaining be aware: a lot of the positioning could possibly be a part of “non‐directional methods—similar to money‐and‐carry,” that are impartial methods used to lock in arbitrage beneficial properties and are usually not merely a direct guess towards ETH.
At press time, ETH traded at $2,629.
Featured picture created with DALL.E, chart from TradingView.com
