Ethereum Stabilizes as CME Shorts Unwind
Key Takeaways
- Ethereum (ETH) had been under pressure for months due to short positions on CME futures.
- These positions were part of an arbitrage strategy – not a direct sign of pessimism toward ETH.
- Most of these positions have now been closed, removing a technical drag on the price.
- ETH shows strong fundamentals, but currently lacks new momentum to drive price growth.
The Reason Behind the Short Pressure on Ethereum
In November 2024, the so-called “basis” of Ethereum futures on the U.S. CME (Chicago Mercantile Exchange) exceeded 20%. The basis refers to the difference between the price of a future and the current spot price (i.e., the actual market price). This significant discrepancy created a classic arbitrage opportunity for institutional investors: they bought ETH on the spot market – often via exchange-traded funds (ETFs) – and simultaneously sold futures on CME.
This strategy was not a sign of distrust in Ethereum, but rather a structured trading approach to profit from the price difference. However, it led to a massive buildup of short positions, which technically weighed on the ETH price.
The Pressure Is Easing – What Has Changed?
Since early 2025, the basis has significantly decreased and now sits at around 4–5%, bringing it closer to the yields of U.S. Treasury bonds. As a result, the arbitrage opportunity has disappeared. Institutional investors began unwinding their positions: they covered their short positions on CME and simultaneously sold off their spot ETH holdings.
This unwinding was costly – it significantly contributed to Ethereum’s weak price performance in the first quarter of 2025. At its peak, the open short volume reached over USD 600 million.
Strong Fundamentals, But No New Catalysts
Despite the weak price trend, Ethereum’s fundamental outlook remains stable. On-chain data shows:
- Increased accumulation by so-called “whales” (large investors)
- Dominance in the DeFi sector (decentralized finance applications) with over USD 190 billion in Total Value Locked (TVL)
- A historically favourable MVRV Z-Score – an indicator used to assess cryptocurrency valuations
These metrics suggest a possible bottoming pattern. However, there is currently a lack of macroeconomic or market-internal triggers to spark a new upward movement.
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What It Would Take for a Breakout
With the structural pressure removed, Ethereum is now more receptive to positive catalysts. Potential triggers could include:
- A dovish policy shift by the U.S. Federal Reserve
- Approval of an Ethereum spot ETF or increased capital inflows into existing products
- Growth and adoption of Layer 2 solutions (scaling networks built on top of Ethereum)
Without such catalysts, price action is likely to remain subdued. Market participants are currently in a wait-and-see mode.
Our Assessment
The unwinding of short positions on CME futures is a key development. It removes a technical drag, but does not automatically translate into new buying pressure. Ethereum now stands on a more neutral footing – this presents an opportunity, but not a guarantee of rising prices.
If you are invested in ETH or considering entering the market, keep a close eye on macroeconomic trends and ETF inflows. Only when these areas show movement could Ethereum regain momentum. Until then, patience is required.
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