The Kobeissi Letter, an investment weekly focused on global capital markets, recently published an article on X stating that Wall Street hedge funds are massively shorting Ethereum, resulting in a 40% increase in Ethereum's short positions in just one week and a 500% surge since November 2024.

The Kobeissi Letter It was pointed out that everything began when Trump signed an administrative order announcing that from February 4, it would impose a 25% tariff on imports from Canada and Mexico and a 10% tariff on imports from China, which raised concerns about the global trade war and led to the decline of a large number of risky assets.

Within 60 hours of the news, Ethereum plummeted by 37%, and the cryptocurrency market evaporated over $1 trillion in just a few hours.

The Kobeissi Letter Despite hedge funds aggressively increasing their short positions since December 2024, Ethereum continues to receive significant capital inflows. In just three weeks at the beginning of December, ETH received over $2 billion in new funds and set a new historical high of $854 million in inflows per week. However, hedge funds have been suppressing the rise of ETH, limiting the room for breakthrough.

Despite the sustained strong trading volume of ETH. After January 21st (the inauguration day of the US President), ETH trading volume increased significantly. During the sharp decline on February 3rd, there was also a significant increase in trading volume. However, even after a week, ETH still failed to repair the sharp drop gap at that time.

The Kobeissi Letter believes that in the past few years, the market has been concerned that the SEC (US Securities and Exchange Commission) may consider ETH as a security. However, under the new SEC management of the Trump government, this possibility is greatly reduced. Even Eric Trump, Trump's son, wrote on the social media that now is a good time to increase his position in ETH. But ETH is still not favored by the market.

There are currently various opinions in the market regarding this, and The Kobeissi Letter suggests that possible reasons include:

Market Manipulation and Crypto Hedge: A Pessimistic View on the Development of ETH Industry (Bearish Outlook)

Affected by this extreme short position, ETH's performance is significantly lagging behind Bitcoin (BTC), with BTC's market value now six times that of ETH, reaching the highest proportion since 2020.

The Kobeissi Letter It is believed that such extreme short positions may trigger a bearish market and lead to more frequent violent fluctuations similar to those on February 3rd.