Ether Bears Are Done and That’s Fueling ETH’s Surge, Crypto Benchmark Issuer Says
Ether’s recent price rally, while significant, lacks robust underlying bullish sentiment. Analysis suggests the surge is primarily driven by short covering—traders closing out bearish positions—rather than an influx of new long positions or leveraged bets. This contrasts with typical market rallies fueled by increased bullish conviction and new investment.
This conclusion is supported by data from the Chicago Mercantile Exchange (CME), a market favored by institutional investors. The CME’s Ether futures contracts, referencing the CF Benchmarks’ Bitcoin Reference Rate – New York (BRRNY), show a relatively stable basis (the difference between the futures price and the spot price). The annualized one-month basis for CME Ether futures has remained consistently between 6% and 10%, according to Velo data. This flat basis, despite a nearly 90% increase in Ether’s spot price since early April, indicates a lack of substantial new long positions. In a genuinely bullish market, a significantly higher basis would be expected as traders leverage their long positions.
The argument that sophisticated arbitrage trading accounts for the stable basis is weak. While arbitrageurs could theoretically exploit price discrepancies between CME futures and spot prices, this is undermined by low net inflows into U.S.-listed Ether spot ETFs. Data from SoSoValue reveals that positive inflows have occurred on only ten trading days in the past four weeks, with only one instance exceeding $100 million. This limited ETF inflow further supports the contention that the rally is predominantly fueled by short covering, not fresh bullish investment.
In essence, the muted basis and low ETF inflows suggest that the current Ether price increase isn’t driven by widespread bullish conviction or new leveraged long positions. Instead, it appears to be a temporary price boost resulting from traders exiting their short positions, a phenomenon that doesn’t necessarily signal sustained long-term upward momentum. The rally, therefore, reflects repositioning and risk reduction rather than a fundamental shift in market sentiment.
