$ETH The short covering is causing an ETH price rally as bears retreat, says CF Benchmarks.

The recent Ethereum rally above $2,600 is not the result of strong bullish conviction, but rather a wave of short covering, according to CF Benchmarks CEO, Sui Chung. The sharp upward movement in ETH price began after a massive sell-off in early April; however, data shows limited inflows into spot ether ETFs and a tepid CME futures premium. This indicates that the movement is not supported by new leveraged longs. As traders unwind bearish positions, Ethereum's valuation receives a temporary boost, despite the absence of strong institutional demand or significant ETF accumulation.

Short covering, not bullish bets, is driving Ethereum's rise

The latest price rally of Ethereum is largely driven by the closing of bearish positions. Sui Chung, CEO of cryptocurrency index provider CF Benchmarks, emphasized that short covering, not new long positions, is driving the recent strength of ETH. Traders are buying back futures contracts to exit short positions, pushing ETH price upwards. However, the CME ether futures basis remains flat, between 6% and 10% annually, indicating a lack of strong speculation on the long side. In typically bullish conditions, a rising basis would suggest that leveraged longs are entering the market. Here, the flat premium supports the narrative of a strategic repositioning rather than renewed investor enthusiasm.

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