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Highlights
- Ethereum short positions have surged by 40% in the past week and an astonishing 500% since November 2024.
- ETH price faces further decline or a potential short squeeze, with ETH currently trading at $2,636, down 1%.
- Despite short positions, spot Ethereum ETFs also outpaced Bitcoin ETFs last week, with net inflows of $420 million.
The ETH price is now trading at a crucial support of $2,600 in a make-or-break situation as Ethereum short positions have surged by a massive 40% over the past week. As Ethereum fails to register a significant bounce back, hedge funds are showing signs of remorse. Investors wait on the sidelines whether ETH could see a further correction or bounce back causing a potential short squeeze.
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.
In another X post, Martinez stated that ETH looks ready to rebound as the TD sequential indicator presents a buy signal on the weekly and daily chart. His accompanying chart showed that the crypto could rebound to as high as $2,800.
As of press time, the 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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