Hedge Funds Are Shorting Ethereum In Record Numbers, Short Squeeze Coming?

The recent Ethereum run-up toward its all-time high levels had successfully triggered a wave of bullish momentum that threatened to break the $5,000 level. However, this has not been the case as sellers have been able to dominate once again and have pushed the price back downward. Most of this bearish pressure looks to be driven by large hedge funds, who continue to bet against the second-largest cryptocurrency by market cap in record numbers.

Ethereum Shorts Reach Record Levels

As the Ethereum price has crossed $4,000, so have the shorts piled on, with many expecting the rally to run out of steam. Mostly, these short numbers are being driven by large hedge funds, pushing down the Ethereum price. This is not the first time, as hedge funds have continuously tried to suppress the ETH price in order to minimize losses on their end.

According to data from the Net Positions of CME Ether Futures dashboard on The Block’s website, these short numbers have actually risen to levels not seen before. For hedge funds alone, they have almost doubled their short positions in the month of August.

As the website shows, the total number of hedge fund-driven Ethereum shorts was sitting at $2.3 billion on August 5. However, this figure has quickly grown to $4.19 billion at the time of this report. This suggests that hedge funds are still expecting the Ethereum price to break down from here.

Other Positions On ETH

In contrast to hedge funds, asset managers have remained rather bullish on Ethereum. The data shows that they continue to be long Ethereum, rising to over $1.22 billion in the positive at the time of this report. While this is prominent, it still falls short of the bearish positions, showing that there is more shorting going on.

Non-reported positions remain in the positive at $77.5 million. Meanwhile, there is also the “Others” position, which often encompasses retail and the likes, and that comes out in the negative at -$397.5 million, adding more fuel to the shorting going on.

For the hedge funds, the more the Ethereum price rises, the more they lose money, and the lower the price goes, the more money they make. However, with short positions at record levels, historical performance suggests that times like these are when a short squeeze is likely, and the price could rally as a result.