Analysis: The main force behind this round of Ethereum short selling is suspected to be a hedge fund

On August 20th, Ethereum recently experienced a significant surge and reached nearly $5,000, which triggered a bullish rally. Nevertheless, this crucial level was not successfully broken through as sellers once again took the upper hand and forced the price to decline. A considerable amount of the downward pressure seems to originate from large hedge funds that continue to have heavy short positions in the second-largest cryptocurrency. When the Ethereum price exceeded $4,000, the number of short positions also started to rise. Many market participants expected the upward momentum to weaken. A large number of these short positions were led by major hedge funds, further intensifying the downward pressure on Ethereum. This is not an isolated incident as hedge funds have been trying to suppress the ETH price in an attempt to reduce their own losses. According to The Block's "CME Ether Futures Net Position" dashboard, these short positions have reached a historic high. Only hedge funds saw their short positions nearly double in August. The data indicates that on August 5th, hedge fund-dominated Ethereum shorts were $2.3 billion. However, in the latest report, this figure quickly surged to $4.19 billion, suggesting that hedge funds are still betting on a decline in the ETH price. In contrast to hedge funds, asset management firms remain relatively optimistic about Ethereum. The data shows that they continue to hold over $1.22 billion in long positions. Although this is a substantial amount, it is still lower than the short positions, indicating that short positions still dominate the market. Undisclosed positions remain bullish at $77.5 million. Meanwhile, investors classified as "Others" (usually including retail investors) hold $397.5 million in short positions, adding further downward pressure to the market. For hedge funds, an increase in the ETH price means losses, while a decrease means profits. However, with short positions at historic highs, historical trends suggest that such periods often lead to a short squeeze, which may potentially trigger a new round of price surges.