Hedge funds have reached record short positions in ether (ETH) futures on the Chicago Mercantile Exchange (CME), raising questions about their motivations. As of early February 2025, hedge funds held a net short position of 11,341 contracts, an increase of 40% in one week and 500% since November. This surge suggests that while some shorting may be driven by outright bearish sentiments, much of it is attributed to carry trades or arbitrage strategies. Carry trades involve shorting CME futures while buying spot ether ETFs, aiming to exploit pricing discrepancies between the futures and spot markets. Despite unfavorable macro conditions and ETH's underperformance, steady ETF inflows have been observed, which may correlate with increased futures short interest. Observers indicate significant involvement from hedge funds in these carry trades, particularly through regulated exchanges, suggesting a complex strategy at play rather than simple bearish bets.

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