Ethereum Under Siege: Why Traders Are Betting $130M Against ETH—And Who’s Buying the Dip?

Ethereum is facing a major test as traders flood the market with short positions, betting big on a price decline. But while the bearish sentiment dominates headlines, institutions are quietly making moves that could shake up the narrative.

The Short Bet: Why Traders See Ethereum at $2,000

Data from derivatives exchange Deribit reveals that traders are piling over $130 million into short positions, largely targeting a drop to $2,000. Meanwhile, hedge funds are going even bigger—over $1.45 billion has been wagered against Ethereum on the Chicago Mercantile Exchange (CME), making this the largest ETH short position in history.

Ethereum’s performance isn’t helping its case. The asset has struggled to keep up with the broader crypto rally, currently trading at $2,650, down 0.5% on the day. The ETH/BTC ratio has plunged to a four-year low, and Ethereum still lags 50% below its all-time high of $4,848.

Surprisingly, this bearish momentum comes despite the broader crypto market reacting positively to Trump’s potential return to the White House—a factor that many expected to benefit Ethereum. Instead, CME shorts have skyrocketed 500% since November, according to market research firm Kobeissi Letter.

The Contrarian Play: Institutions Are Accumulating

While short positions dominate the market, institutional investors are taking a different approach. According to CoinShares, last week saw $790 million flow into spot Ethereum ETFs—outpacing Bitcoin investments for the first time this year.

“Ethereum stole the show,” noted James Butterfill, head of research at CoinShares.

This suggests that while many traders are betting against ETH, others are seizing the opportunity to buy at lower levels.

BitGalactic’s Take: Smart Money Is Playing Both Sides

From BitGalactic’s perspective, the massive short interest on ETH isn’t just a straightforward bearish bet—it’s a sign that sophisticated investors are executing arbitrage strategies. Here’s how:

• Shorting Ethereum Futures: Traders place bearish bets on Ethereum’s price via CME futures.
• Buying Ethereum ETFs: At the same time, institutions accumulate spot ETH through ETFs.
• Profiting Regardless of Price Direction: If Ethereum drops, their shorts win. If Ethereum pumps, their ETF holdings benefit.

This dual approach allows them to profit regardless of market moves. Retail traders should take note—extreme bearish sentiment often signals a potential short squeeze, where rapid price reversals can liquidate short positions and drive prices higher.

Bottom Line: Is Ethereum’s Bearish Bet a Trap?

While the market appears overwhelmingly bearish, deep-pocketed investors are playing a more complex game. If Ethereum’s price stabilizes or reverses, those short positions could be forced to unwind—fueling a rally that few expect.

Will Ethereum continue its descent, or is this the perfect setup for a short squeeze? As always, crypto moves fast, and the next big twist may be just around the corner.