Outside Source
Ethereum may also lack fundamental blockchain activity for an Ether price recovery, analysts told Cointelegraph.
News
Hedge funds are increasing short positions against Ether as the world’s second-largest cryptocurrency struggles to gain momentum.
Ether (ETH) has struggled to gain momentum over the past year, rising only 5.9%, underperforming compared to Bitcoin (BTC), which surged 104%, according to Cointelegraph Markets Pro.
ETH&BTC, 1-year chart. Source: Cointelegraph Markets Pro
Short positions on Ethereum have risen more than 500% since the US Presidential election in November 2024, according to data shared by the Kobeissi Letter. In a Feb. 10 X post, the financial newsletter wrote:
“Short positioning in Ethereum is now up +40% in one week and +500% since November 2024. Never in history have Wall Street hedge funds been so short of Ethereum, and it’s not even close.”
Ether cash-settled leveraged net short totals. Source: Kobeissi Letter
“We saw the effects of this extreme positioning on February 2nd, Ethereum fell -37% in 60 hours as the trade war headlines emerged,” the post added.
ETH/USD, 37% decline in 60 hours. Source: Kobeissi Letter
Ethereum has underperformed Bitcoin “largely due to this extreme positioning,” which may result in a “short squeeze.” This occurs when the price of an asset makes a sharp increase, prompting short sellers to buy Ether to avoid greater losses.
Related: Binance co-founder clarifies token listing process amid TST controversy
Ethereum pressured by L1 altcoin “dilution,” unlike Bitcoin
While Bitcoin is recognized as the “digital gold” of the industry, Ethereum faces growing competition among other layer-1 (L1) blockchains.
This may be another fundamental reason for Ether’s underperforming Bitcoin price, according to James Wo, the founder and CEO of venture capital firm DFG.
He told Cointelegraph:
“Ethereum is competing with multiple other high-performance Layer 1 tokens. Given that there are so many new chains being launched, the dilution for alts is worsened which has not helped in Ethereum’s lackluster price action.”
“Ethereum still has the largest ecosystem of DeFi and is home to many well established protocols such as Uniswap, Lido and Aave. When onchain activity picks up again, we can expect Ethereum’s price action to improve,” Wo added.
Related: Bitcoin holds $95K support despite heavy selling pressure
Other experts also believe that Ethereum needs more blockchain activity to start recovering above $4,000.
To reverse its decline and move toward its previous highs, Ether will need more fundamental blockchain activity first, according to Aurelie Barthere, principal research analyst at Nansen.
“Other layer-1s are catching up with Ethereum regarding apps, use cases, fees and amount staked,” Barthere told Cointelegraph.
Barthere believes Ethereum could benefit from increased collaboration with private and public sector entities, particularly in the US, given recent regulatory momentum in favor of blockchain and crypto.
Magazine: Pectra hard fork explained — Will it get Ethereum back on track?
This article first appeared at Cointelegraph.com News
