Hedge Funds Set Record Shorts on ETH — Is the Market Setting a Trap?

On the CME futures market, the total volume of Ethereum shorts held by hedge funds continues to hit all-time highs. But on the spot market, the picture is different — there’s a steady stream of buying.

Here’s what it could mean:

1. Short squeeze on the horizon

When too many traders hold short positions, any sudden price increase forces them to close those positions by buying back ETH. This wave of demand can push the market even higher.

2. A sharp shift in sentiment

Institutional investors who were betting against Ethereum just yesterday could quickly flip to the long side. Such reversals are often fast and painful for those who are late to react.

3. The current rally isn’t random

The surge in ETH above $4,200 could very well be the result of record shorts starting to unwind. This creates strong upward momentum, often acting as a catalyst for new highs.

Right now, Ethereum is in a rare situation: record short pressure on futures and active spot buying. If the market turns against the shorts, we could witness the most brutal short squeeze of the year — and possibly a new chapter in ETH’s history.