New Surge in Ether Short Positions as Hedge Funds Embrace Basis Trading

Traders can capture an annualized yield of up to 9.5% by shorting ETH on the CME exchange.

Hedge funds are increasingly betting against Ether (ETH), accumulating a staggering $1.73 billion in short positions on CME contracts. This strategy allows traders to earn yield as ETH’s price climbs towards $3,000.

The trading strategy, known as basis trading, involves shorting ETH futures on the CME while simultaneously purchasing spot ETFs, enabling traders to secure a potential annualized yield of 9.5%. In a single day, inflows into ETH ETFs surged to an unprecedented $421 million. Traders looking to maximize their returns can further enhance yields by staking their purchased Ether for an additional 3.5% yield.

During this latest price rise, hedge funds have established significant short positions, indicating a shift in market sentiment. According to reports, this surge in short positions is reflective of an ongoing trend where leveraged positions have heavily favored the downside.

As traders adopt this basis trading method, those entering new short positions can potentially benefit from fluctuations in the market while capturing substantial yields.

“Ether leveraged shorts going all-in: biggest short on record”
— zerohedge (@zerohedge) July 13, 2025
(Translation: Ether leveraged shorts reach an unprecedented peak.)

Understanding Basis Trading

Basis trading involves shorting an asset on one platform while buying on another, remaining neutral between prices. In this instance, traders plan to earn around 9.5% annually by shorting ETH on the CME and purchasing spot ETFs, which collectively amount to nearly $12 billion in assets.

Conclusion: While Bitcoin was previously a preferred choice for basis trading, its yield has suffered, leading traders to pivot towards Ethereum during this latest market cycle.