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Ether, the cryptocurrency native to the Ethereum blockchain, has been lagging behind Bitcoin and other major cryptocurrencies, unable to break free from a year-long trading range of $2,500 to $4,000.
According to the The Block, analysts identified significant short positioning by hedge funds as a key reason for Ether’s underperformance, with its price still about 80% lower than its November 2021 peak of $4,800.
The Kobeissi Letter highlighted the increase in bearish bets against Ether, noting an unprecedented rise in short positions. "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,” the publication stated.
This heavy short selling is believed to have capped Ether’s potential for price gains, preventing it from mirroring Bitcoin’s upward movement.
Despite Ether’s price stagnation, trading volumes have seen strong numbers in recent weeks. However, two notable surges in trading volume—one following Donald Trump’s inauguration on January 21 and another during a broader market sell-off on February 3—have not translated into a sustained price recovery for Ether.
The Block’s Arete Capital founding partner Ilya Paveliev provided insights into the reasons behind the short positions on Ethereum. Paveliev pointed to structural issues within Ethereum, such as a perceived lack of innovation and slow movement by the Ethereum Foundation, as well as market-driven factors like the migration of retail traders to alternative networks offering lower fees and a better user experience.
Additionally, a decline in NFT trading volumes, which previously fueled speculation and network activity on Ethereum, has also contributed to its weaker performance.
Paveliev further suggested that Ethereum may be increasingly seen as a commodity trading in Bitcoin terms rather than U.S. dollars, which could reinforce Bitcoin’s status as the dominant asset in the crypto market. He warned that without proactive ecosystem growth, Ethereum risks falling behind as competitors gain market share.
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