Ethereum: Record Short Positions on CME Contrast with Bullish Projections

• Spikes in Ethereum short positions reflect bearish sentiment.
• Analysts point to potential for Ethereum to surpass $5.000.
• Ethereum network sees high activity and deflationary supply.

Leveraged short positions in Ethereum on the Chicago Mercantile Exchange (CME) have hit an all-time high, reflecting a strong bearish sentiment among institutional investors. At the same time, the interest Open interest in Ethereum futures on CME has surpassed the one million ETH mark, reinforcing speculation volume.

$ ETH vs. $ BTC looks great.

It has seen its first test at 0.04 and couldn't break through it.

I assume that we'll see this test taking place in the upcoming weeks, resulting into a big breakout for the #altcoin markets. pic.twitter.com/QxN9E6TEsg

- Michaël van de Poppe (@CryptoMichNL) December 14, 2024

In recent weeks, total open interest in Ethereum across global markets has reached 6,91 million ETH, worth $27 billion. This growth represents a significant increase in speculative activity, but it also raises concerns about the impact on the asset’s price, especially as short positions increase.

The data suggests that hedge funds are using these positions as a hedging strategy, known as a “basis trade,” which aims to take advantage of differences between the spot market and futures contracts. However, if the price of Ethereum unexpectedly surges, the market could face mass liquidations, adding selling pressure.

Despite the pessimism surrounding short positions, many analysts remain optimistic about Ethereum’s future. Data from CryptoQuant suggests that the asset could break above $5.000, with the upper realized price band positioned at $5.200, indicating strong upside potential. “The realized price band, currently at $5,2, coincides with the 2021 bull market peak, signaling further upside potential,” the platform noted.

Furthermore, the growing demand for Ethereum ETFs has been driving the accumulation of the asset. Despite significant outflows in Grayscale ETHE, other products such as BlackRock ETHA have seen positive net inflows of over $3 billion, supporting the bullishness in the market.

At the time of publication, the price of Ethereum was quoted at $3.855,03 with a drop of 2.2% in the last 24 hours.

From a technical perspective, the support range between $3.700 and $3.810 is considered critical for maintaining Ethereum’s current price. The increased activity on the Ethereum network also reinforces the bullish narrative. The number of new addresses increased by 2,63% in the last week, reaching an average of 130 daily creations. With the ETH burn rate now at 2.700 ETH per day, the supply has once again become deflationary, fueling predictions of future appreciation.