Ethereum is at the heart of an unprecedented selling pressure. While Bitcoin continues the performance, the second crypto of the market struggles to regain its radiance. A critical signal for investors? Since November 2024, short positions on Ethereum have exploded by 500 %, a level never reached before. The hedge funds, these experienced institutional investors, bet massively on a collapse of the ETH course, which still intensifies the volatility of the market. If the extreme pessimism of the markets were to reverse, a brutal squeeze shorts could cause a dazzling rise in prices.
The hedge funds accentuate the pressure on Ethereum
The selling positions on the ETH multiply at an unprecedented pace. According to Kobeissi Letter data, the quantity of Shorte Ethereum jumped 40 % in a week, which marks a disturbing acceleration of the downward trend. “Never in the history of Wall Street the hedge funds have bet as much against Ethereum, and the gap is considerable,” says Kobeissi Letter In a publication on February 10, 2025 on the X platform (ex Twitter).
This aggressive strategy has already had a significant impact on the market. On February 2, Ethereum suffered a collapse of 37 % in just 60 hours, a fall directly linked to the excessive accumulation of short positions. These institutional investors seem to consider that the trajectory of Ethereum is doomed, which makes it particularly vulnerable to panic movements.
Ethereum in search of a bull catalyst
Beyond speculative strategies, Ethereum faces increased competition. James WO, CEO of DFG, highlights the rise of layer 1 (L1) blockchains as a key factor in ETH weakening. “The multiplication of new blockchains dilutes interest in Ethereum, complicating its ascent,” he explains. Unlike Bitcoin, perceived as an asset refuge, Ethereum must constantly prove its usefulness and adoption to justify its valuation.
However, everything is not lost. Ethereum retains a dominant deffi ecosystem with major protocols like Uniswap, Lido and Aave. According to Aurélie Barthere, analyst at Nansen, the solution to reverse the trend lies in an increase in on-chain activity and increased integration with public and private institutions. A more marked institutional adoption, especially in the United States, could revitalize demand and counter the selling pressure of the hedge funds.
If the downward pressure continues to intensify, Ethereum could be trapped in a descending spiral. However, an excessive accumulation of short positions creates a risk of Squeeze shorts: a rapid bullish movement which can force sellers to redeem themselves precipiously, with an outbreak of prices. The future of ETH will therefore depend on its ability to rekindle its ecosystem and regain market confidence. In this ultra-speculative environment, caution remains for investors.
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