Ethereum Short Position Surge 40% In A Week, ETH Price Crash Ahead?

Ethereum short positions have skyrocketed surging to more than 40% over the past week, the largest short position on the altcoin in history. This happens as the ETH price has seen strong selling pressure in recent weeks with short traders showing no signs of remorse. Analysts are weighing whether ETH could see further downfall or if a short squeeze is in the making.

Ethereum Short Positions Paint A Scary Picture

Over the past week, the Ethereum short positions have skyrocketed increasing by 40% and a staggering 500% since November 2024. Historically, this is the largest bearish bet on the world’s largest altcoin by Wall Street hedge funds as trader sentiment turns extremely negative.

Earlier this month on February 2, a similar extreme positioning on Ethereum saw ETH price dropping 37% within three days on fears of the Trump trade war. Furthermore, the altcoin has seen robust trading volumes overall. Significant spikes were observed on January 21st, coinciding with Inauguration Day, and again during the February 3rd market crash. Despite the strong activity, ETH’s price has yet to recover from the gap lower, even a week after the downturn.

ETH Price Volatility Ahead? A Make-or-Break Situation

This extreme positioning on Ethereum shows that it could experience strong ETH price volatility moving ahead. The ETH price has largely underperformed the broader crypto market in recent times while other altcoins managed to hit fresh highs.

Crypto analyst Ali Martinez has identified $2,600 as a critical support level for (ETH). In a recent post, Martinez suggested that if this level holds, Ethereum could gather enough momentum for a significant rebound, potentially pushing the price toward $3,000 or even $4,000. Traders and investors are closely monitoring ETH’s performance at this key threshold.

As of press time, Ethereum price is trading 1% down at $2,636 with its market cap at $317 billion and its daily trading volume surging 20% to $19.5 billion. As per the Coinglass data, the 24-hours liquidations have shot to $44.65 million of which $30 million is in long liquidations. Also, the massive movement of 50,000 ETH by the Ethereum Foundation has made investors cautious, as the fund has been selling the altcoin over the past few months.

Crypto analyst Ted Pillows has drawn parallels between Ethereum’s recent price action and the market conditions of March 2020. He noted that ETH experienced a similar capitulation back triggering a long-term breakout for the altcoin.

“At the time, many believed Ethereum was finished, but it staged a significant comeback,” he noted. Pillows remains optimistic, projecting Ethereum could reach $10,000 this cycle, calling it a “programmed” milestone. Further, the 90% drop in ETH gas fee could also contribute to the rally ahead.

Institutional Demand Remains High

Despite the strong short exposure, Ethereum witnessed significant inflows in December 2024, signaling strong investor interest. Over three weeks, ETH attracted over $2 billion in new funds, including a record-breaking weekly inflow of $854 million.

Furthermore, last week, the spot Ethereum ETFs saw greater inflows than the US spot Bitcoin ETFs. Between February 3 and February 7 (Eastern Time), Bitcoin spot ETFs recorded a net inflow of $204 million, while the spot Ethereum ETFs outpaced Bitcoin with a notable net inflow of $420 million during the same period.

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Bhushan Akolkar

Bhushan is a FinTech enthusiast with a keen understanding of financial markets. His interest in economics and finance has led him to focus on emerging Blockchain technology and cryptocurrency markets. He is committed to continuous learning and stays motivated by sharing the knowledge he acquires. In his free time, Bhushan enjoys reading thriller fiction novels and occasionally explores his culinary skills.

Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.