Hedge Funds Ramp Up $1.73B Ether Shorts to Exploit Basis Trade Yields
Hedge funds are piling into short positions on ether (ETH) as the cryptocurrency hovers near the $3,000 mark, capitalizing on lucrative opportunities from basis trades that promise yields approaching 9.5% annually.
CFTC data, shared by The Block, reveals that hedge funds have amassed $1.73 billion in ETH short positions on the Chicago Mercantile Exchange (CME) — a favored venue for institutional players. Additional CME data spotlighted by zerohedge indicates that leveraged net positioning is overwhelmingly tilted toward the short side.
In a basis trade, traders short futures contracts while simultaneously purchasing the underlying spot asset, creating a delta-neutral stance that minimizes directional risk. In the case of ETH, this approach allows market participants to capture a notable yield differential between CME futures and spot prices. Currently, traders can lock in about 9.5% annualized returns by shorting ETH futures on CME while holding spot ether ETFs, which collectively manage roughly $12 billion in assets.
Momentum behind this strategy has surged, with Coinglass reporting record inflows of $421 million into ether ETFs on Thursday alone — part of a sustained trend since early May.
Additionally, hedge funds could enhance returns further by staking the spot ETH they purchase, potentially adding another 3.5% per year. However, this staking yield isn’t accessible to ETF holders, since ETF custodians maintain control over the underlying tokens.
Last year, bitcoin (BTC) was the primary target for basis trades, but yields plummeted in March, cooling both trading activity and price momentum. With ETH offering more attractive returns, the focus has clearly shifted.
