16 May 2025
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Ether Rally Driven by Short Covering, Not New Bullish Demand
Ether's recent rally is largely attributed to short covering, rather than new bullish positions. Key points include:
- Short covering involves traders buying back futures contracts they initially sold, temporarily increasing demand and prices.
- The CME futures premium remains low, indicating the rally is not driven by fresh long positions.
- Despite a nearly 90% increase in ether's spot price since early April, the annualized one-month basis in CME ether has remained flat between 6% and 10%.
- Rising basis levels are typically expected with new leveraged longs; the current situation suggests repositioning and risk reduction instead.
- U.S.-listed spot ETFs have seen minimal net inflows, totaling over $100 million on only one occasion in the past month.
- The absence of significant inflows into ETH ETFs further supports that the rally is not fueled by new leveraged positions.