Under Pressure: Ethereum Struggles as Hedge Funds Increase Short Positions
Ethereum is having difficulty breaking free from its long-term price channel, oscillating between $2,500 and $4,000, while other digital assets such as Bitcoin and Solana are displaying much more dynamic performances. One factor weighing on Ethereum’s evolution, according to The Kobeissi Letter, is the increase in short positions by hedge funds, who have significantly strengthened their bearish bets on the asset.
The question arises: why are hedge funds so eager to short Ethereum?
The Kobeissi Letter
The numbers are impressive: a 40% increase in short positions in one week and a 500% increase since November 2024. Such a concentration of short sales could explain Ethereum’s difficulty in keeping up with the crypto market’s bullish momentum.
What is happening with Ethereum?
Short positioning in Ethereum is now up +40% in ONE WEEK and +500% since November 2024.
Never in history have Wall Street hedge funds been so short of Ethereum, and it’s not even close.
What do hedge funds know is coming?
(a thread)
According to analysts, these significant short positions have indeed limited ETH’s ability to break out of its range, preventing it from following Bitcoin’s upward trajectory. However, independently verifying this data remains difficult, and it should be approached with caution.
An Increased Competition and Doubts About the Network’s Future
Beyond the pressure from hedge funds, Ethereum must contend with growing competition. Blockchains such as Solana and Base are attracting more users due to lower fees and optimized experiences, especially for memecoin and artificial intelligence-related applications. This user migration weakens Ethereum’s network effect and limits its attractiveness to new market entrants.
On the other hand, Ethereum’s governance raises questions. Some actors believe that the Ethereum Foundation, despite being well-funded, struggles to innovate at the same pace as its competitors. This perceived inertia could slow institutional adoption and hinder the network’s long-term growth.
The Impact of Declining NFT Trading Volumes and Ethereum’s Positioning
Another weak point is the decline in NFT trading volumes, which have long been a source of transactions and economic activity for the network. Unlike some competing blockchains, Ethereum does not have a centralized sales team to attract new projects, leading some initiatives to turn to multi-chain solutions or create their own infrastructures, such as Avalanche with its subnets.
Finally, some analysts believe that Ethereum could eventually be perceived more as a commodity than a speculative asset, akin to crude oil. In this scenario, its value would evolve more in relation to Bitcoin than the dollar, further solidifying BTC’s position as the dominant asset in the market.
An Uncertain Evolution But a Still Solid Ecosystem
While Ethereum faces structural challenges and significant selling pressure, it remains one of the most robust and widely used platforms in the crypto industry. Its institutional adoption, although slower than Bitcoin’s, continues to progress. The challenge in the coming months will be to see if Ethereum can revitalize its attractiveness compared to its competitors or if it will continue to experience a prolonged period of stagnation.
