Hedge funds, particularly noticeable by a move toward ramping up short positions in Ethereum that seems to be escalating rapidly and that is unprecedented, are therefore posing some doubts about the future trajectory of the second-largest cryptocurrency by market capitalization. On February 10, 2025, the price of Ethereum (ETH) is around $2,634, and it has a drop of 0.86% over the last 24 hours. The bearish time on Wall Street is happening right at the time when the entire digital currency market is mixed, with Bitcoin being stable at $96,000 and altcoins being more or less volatile.
It is the substantial increase in Ethereum short betting that has to be pointed out, as it is a crypto that has been performing well of late, and new developments in the Ethereum ecosystem have been happening. Besides the merger’s completion in 2022 and the updates that followed, it looks like institutional investors are not optimistic about ETH’s performance over the next few months. A surge in the number of short positions taken was due to various reasons like issues with capacity, competition from other smart contracts, and the broader macroeconomic context.
The data from the most important derivatives exchanges indicates an observable and significant rising trend in the number of short positions initiated for ETH during the last few days. This shift is largely the doing of institutional investors, which is an indication that Wall Street expects to see a reduction in the value of Ethereum. The consequences of the bearishness might be far-reaching, perhaps, not just the price of Ethereum, but also the decentralized finance (DeFi) that is operated mainly by the Ethereum blockchain.
Nevertheless, the significant thing one has to bear in mind is that the increase in short positions is not always a warrant for the decline in price. In reality, they might lead the way for a short squeeze if Ethereum’s price were to rise unexpectedly, which would cause short sellers to be obliged to buy back ETH to make up for their positions. In this way, an extra layer of complexity is added to the current market situation, and the increased volatility in the coming weeks is a possible consequence of this situation.
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