Ethereum's price faces a tug-of-war between aggressive short selling by hedge funds and substantial institutional inflows. Despite a record +500% surge in short positions, Ethereum witnessed $2 billion in ETF inflows in just three weeks. This conflicting trend raises concerns about potential market volatility, with analysts warning of a possible short squeeze that could trigger a significant price surge.
Hedge funds' record +500% ETH shorts clash with $2B Ethereum inflows—market primed for big swings. Short positions have surged by +500% since November 2024, marking the largest bearish bet against the cryptocurrency ever recorded. In the past week alone, short positioning has risen by +40%, according to Wall Street hedge funds . These funds appear to be aggressively shorting Ethereum , even as its price remains relatively flat.
The spike in short exposure comes amidst lingering fears about Ethereum’s underperformance compared to Bitcoin. Since the start of 2024, despite the overwhelming short positions, Ethereum saw $2 billion in fresh ETF inflows in just three weeks, with a record-breaking $854 million weekly inflow, per The Kobeissi Letter. Notable inflows were observed on Day 97 ($434.8M) and Day 100 ($275.7M), indicating strong institutional interest during this period. However, Ethereum’s price has remained largely stagnant, raising concerns that the influx of funds may be offset by heavy shorting activity. Analysts note that this tug-of-war between accumulation and bearish positioning could lead to heightened volatility in the weeks ahead. On February 2nd, Ethereum experienced a 37% price drop within 60 hours, erasing over $1 trillion in crypto market value. Remarkably, the flash crash occurred without any significant news catalyst, drawing comparisons to the 2010 stock market “flash crash.” The Kobeissi Letter suggests this event may have been influenced by extreme short positioning and thin liquidity. Volume spikes were observed around key events, such as the crash on February 2nd and Inauguration Day. The analysis suggests that Ethereum is now approaching levels where multiple indicators align, including the Bid-Ask Ratio, Retail Long%, and Short Liquidation Levels. Analysts warn that if hedge funds’ short positions are miscalculated, a violent short squeeze could reverse the trend. This could create one of the largest price surges Ethereum has ever seen. Ethereum’s current market dynamics remain a battle between hedge funds’ bearish bets and institutional accumulation, making the next move highly unpredictable
ETHEREUM HEDGE FUNDS SHORT SELLING ETF INFLOW MARKET VOLATILITY
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