The latest analysis from Coinbase experts shows that the largest short position in ETH history is overly exaggerated.
The spot ETH ETF recorded a record capital inflow of $1.16 billion in June, mainly due to institutional arbitrage transactions on the CME market.
MAIN CONTENT
The large short position in ETH on the derivatives market is essentially linked to arbitrage activities, not a bad signal.
The strong capital flow into the spot ETH ETF in June reached $1.16 billion, an unprecedented increase.
The basis yield of ETH futures increased to 8-9% in May and June, stimulating institutional investment.
Is the largest short position in ETH history a cause for concern?
David Duong, head of research at Coinbase Institutional, confirms that the figure of the ETH short position on CME is exaggerated, actually reflecting the arbitrage orders between futures contracts and the spot market.
Duong said that the increase in the short position of ETH futures from $466 million at the beginning of May to $1.6 billion at the end of June is not a bad signal but a manifestation of growth in arbitrage trading due to high basis yield.
The massive short position in the ETH futures market reflects the arbitrage trading activities of many institutions, not just normal sell-off pressure.
David Duong, Head of Research at Coinbase Institutional, 5/7/2024
Why did the capital flow into the spot ETH ETF spike in June?
The capital flow into the spot ETH ETF in June reached $1.16 billion, a record high in the history of similar ETF funds. This comes from the trend of institutions taking advantage of arbitrage opportunities between futures contracts on CME and the spot ETH market.
Most of this capital comes from institutional investors using a strategy of buying ETH in the spot market while selling ETH futures with leverage, taking advantage of price differentials to secure stable profits.
How does the basis yield of ETH futures affect the market?
The basis yield of ETH futures compared to the spot market has risen from an average of 6% in February to 8-9% in May and June of this year. This is a significant increase, creating strong appeal for arbitrage activities.
Thanks to the attractive yield, institutional investors are taking this opportunity to buy ETH in the spot market and then sell futures, contributing to increased liquidity and price stability while stimulating capital inflows into the ETH ETF fund.
High basis yield makes the ETH derivatives market more attractive, attracting institutional investors seeking stable arbitrage profits.
David Duong, Head of Research at Coinbase Institutional, 2024
Comparison table of capital flow and ETH short positions from May to June 2024
Indicators May 2024 June 2024 ETH futures short position (USD) 466 million 1.6 billion Net capital flow into spot ETH ETF (USD) Negligible 1.16 billion ETH futures basis yield 6% 8-9%
Frequently Asked Questions
Is the ETH short position a sign that ETH prices will drop sharply? No. Data from Coinbase Institutional shows that the large short position is linked to arbitrage strategies, not uncontrolled sell-off pressure. Why are institutions pouring capital into the spot ETH ETF at this time? The high yield of futures contracts combined with arbitrage opportunities allows institutional investors to use ETFs to optimize their portfolios and secure stable profits. What is basis yield and why is its increase important? Basis yield reflects the difference between futures and spot prices. When it rises, it creates profit opportunities for arbitrage and attracts institutional investment. How does this information affect retail investors? Individual investors should understand that a large short position does not mean that ETH is in crisis, but rather a sign of a deep derivatives market with high liquidity. How does this arbitrage affect ETH prices in the market? Arbitrage activities help reduce price volatility, enhance liquidity, and create price fairness across derivatives and spot exchanges.
Source: https://tintucbitcoin.com/ethereum-khong-co-short-lon-nhat-lich-su/
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