Hedge Funds Short $1.73B in Ether to Profit From Basis Trade Yields
Hedge funds are heavily shorting ether (ETH) as prices hover near $3,000, aiming to capitalize on attractive yields offered by basis trades.
According to data from the CFTC, shared by The Block, institutional investors have built up $1.73 billion in ETH short positions on the Chicago Mercantile Exchange (CME). Analysis highlighted by zerohedge shows that leveraged positions on the CME are firmly tilted toward the short side.
The strategy, known as a basis trade, involves selling futures contracts on one platform while simultaneously purchasing the asset on another, allowing traders to remain delta-neutral and avoid directional price risk. In the current market, shorting ETH futures on the CME while holding spot ether ETFs can generate an annualized return of about 9.5%. Ether ETFs have attracted significant interest, now managing over $12 billion in assets.
Supporting this trade, Coinglass reported a record $421 million in inflows into ether ETFs on Thursday alone—a trend that has gained momentum since early May.
Hedge funds could further increase their yield by staking the spot ETH they acquire, potentially adding another 3.5% per year. However, this option isn’t available to ETF investors because custody of the assets remains with the fund providers.
In 2024, bitcoin (BTC) was the primary focus for basis trades, but returns collapsed in March, slowing inflows and dampening market activity. Now, attention has turned to ETH as a more promising opportunity.
