Ether’s recent price rally is attributed to short covering rather than new bullish bets, according to Sui Chung, CEO of CF Benchmarks. He detailed that as traders unwind their bearish positions, the demand temporarily elevates market prices.

“The rally is primarily the result of short covering – traders unwinding bearish positions – rather than a surge of bullish conviction,” Chung explained. 

Chung noted the CME futures premium remains low, indicating that the uptick is not driven by new leveraged long positions. During the recent rally, which saw ETH prices rise impressively, the annualized one-month basis in CME’s ether has remained stable between 6% and 10%.

This could suggest that while ETH has surged nearly 90% since early April, the movement isn’t a result of widespread new demand but rather reflects a strategic repositioning in the market. Furthermore, the spot price may not solely reflect new investments, as the inflows into ETH ETFs were significantly low.

Chung cautions against equating price rises with new demand, suggesting instead that it often reflects repositioning and risk mitigation among traders.