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.