Ethereum Shorts Misunderstood? Institutions Signal Confidence with Basis Trades Amid Uptrend to $3,000

A record level of short positions against Ethereum on the Chicago Mercantile Exchange (CME) has sparked discussion of widespread bearish sentiment, but key market analysts are pushing back, arguing this is a misinterpretation of how sophisticated institutions are engaging with ETH..

Despite a drop of 3.67% in the past 24 hours, Ethereum maintains a solid weekly gain of 3.48%, currently trading at $2,488.16.

CME Shorts Are Structural, Not Speculative

CME data shows Ethereum short positions climbing steadily since mid-2023, peaking at a net short of -11,154 in mid-2025. At first glance, such figures might suggest widespread bearish sentiment.

However, this assumption misses the underlying strategy. According to van de Poppe, institutions are using these shorts as hedges to balance spot ETH exposure through ETFs. These trades, often referred to as “basis trades,” allow institutions to lock in arbitrage yields of 12% to 18% annually.

Significantly, the short interest appears to move in near-perfect correlation with ETF inflows. This tight correlation supports the idea that these positions are not speculative. Rather, they are strategic plays designed to capture risk-free returns. Hence, record shorts in this context are not signs of fear, but rather confidence in Ethereum’s long-term viability.

The thesis surrounding the largest short position on $ETH isn’t really valid.

These are just shorts to cover the spot longs through the ETF on institutions trading the basis trade to generate 12-18% APY on a year.

It’s almost 1 to 1 correlated with the inflow on the ETF. pic.twitter.com/gGuQsydvgx

— Michaël van de Poppe (@CryptoMichNL) July 3, 2025

On the Charts, Ethereum’s Bullish Structure Is Intact

On the technical side, Ethereum has reclaimed support at $2,403, a key level in its ongoing bullish structure. The price is currently consolidating just below resistance at $2,630.

This zone has been tested multiple times, indicating potential for a strong breakout. Van de Poppe believes Ethereum is on track for a push toward $3,000, provided the $2,630 resistance is flipped into support.

A previous liquidity sweep near $2,233 reinforced buying strength, further supporting the bullish thesis. If momentum continues, the next price target sits between $2,800 and $3,000, potentially marking a new local high.

$ETH has started its upwards run towards $3,000. pic.twitter.com/vFWBj8UPfl

— Michaël van de Poppe (@CryptoMichNL) July 4, 2025

Derivatives Activity Signals Healthy Market Dynamics

Source: Coinanalyze

Ethereum’s open interest remains robust, totaling $15.2 billion. Most of this comes from perpetual contracts, accounting for $14.8 billion. Despite a recent decline of 5.49% in total open interest, futures activity remains steady.

Leading exchanges like Binance, Bybit, and Huobi continue to dominate ETH derivatives trading, indicating sustained market depth and institutional participation.

Source