ETH Bears Stack Up! Short Positions Soar 40%—Can $2,600 Hold?

Ethereum is under intense bearish pressure as short positions on the altcoin have gone up 40% in the last week – the highest short bet in Ethereum’s history.

ETH is struggling to hold $2,600 and with that, the concerns are rising that we could see a price breakdown.

Hedge funds and institutional investors have been shorting Ethereum aggressively, with short positions rising 500% since November 2024. Market sentiment is very bearish, given the broader macro uncertainty and crypto specific concerns.

Earlier this month, we saw a similar extreme positioning and ETH crashed 37% in 3 days due to fears of US trade policies under the Trump administration. Notably, Ethereum’s volume surged on key dates – January 21 (Inauguration Day) and February 3 – indicating increased market activity.

ETH Faces Volatility as Key Support Is Tested

ETH is at a crossroads. Crypto analyst Ali Martinez says $2,600 is the crucial support level – if that holds, ETH could bounce back to $3,000 or even $4,000. But if it breaks, we could see a further decline.

• Current Market Data:

  • ETH trading at $2,636, down 1% in 24 hours

  • Market cap: $317 billion

  • 24-hour trading volume up 20% to $19.5 billion

  • Liquidations: $44.65 million, with $30 million in long liquidations

Adding to the market jitters, the Ethereum Foundation moved 50,000 ETH, which is speculatively going to offload their holdings. Historically, such moves have preceded price drops, so investors should be cautious.

Market observers are also pointing out that the current price action of ETH is similar to March 2020 when Ethereum had a major sell off before having a long term breakout. Crypto analyst Ted Pillows believes this cycle could take ETH to $10,000, citing historical patterns and the 90% drop in gas fees which could stimulate more demand.

Institutional Demand Counters Bearish Bets

Despite the overwhelming shorts, institutional investors are pouring more money into Ethereum. In December 2024 alone, Ethereum investment products saw over $2 billion in inflows, including a record $854 million in a week.ETF data also supports Ethereum’s case. From February 3 to February 7, spot Ethereum ETFs saw $420 million in inflows vs $204 million in U.S. spot Bitcoin ETFs.

Despite the bearish sentiment, institutional demand is still strong. Next few weeks will tell if ETH can hold or another sell off is coming.