In a dramatic shift, hedge funds seem 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 may very well be going through 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 Avenue hedge funds been so wanting Ethereum, and it’s not even shut,” prompting the query: “What do hedge funds know is coming?”
Large Ethereum Quick 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 risky interval on February 2, when Ethereum plunged by 37% in simply 60 hours as commerce warfare 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 sturdy throughout December 2024—whilst hedge funds had been reportedly boosting quick publicity. Based on 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, significantly on January 21 (Inauguration Day) and across the February 3 crash. Regardless of the traditionally excessive inflows, Ethereum’s value has “didn’t get better 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 quite 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 may very well be within the making: May Ethereum be establishing for a brief squeeze? This excessive positioning means huge swings just like the one on February third will probably be extra frequent. Because the begin of 2024, Bitcoin is up ~12 TIMES as a lot as Ethereum. Is a quick 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 indicators a bearish outlook. Senior researcher at Glassnode, CryptoVizArt.₿ (@CryptoVizArt), took to X to problem 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. Significantly, 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 probably represents just one subset of the market (e.g., “Leveraged Funds / Hedge Funds/CTAs”) and doesn’t account for different important market members comparable 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 change’s information would possibly counsel. “One group’s web quick ≠ the whole market is web quick. Hedge positions ≠ purely bearish bets.”
Their closing notice: a lot of the positioning may very well be a part of “non‐directional methods—comparable to money‐and‐carry,” that are impartial methods used to lock in arbitrage features and should not merely a direct wager in opposition to ETH.
At press time, ETH traded at $2,629.
Featured picture created with DALL.E, chart from TradingView.com