Ethereum’s recent surge to the $3,000 level has drawn the attention of hedge funds, but not in the usual direction. Despite the bullish price action, institutional traders are taking the opposite side—building a record short position on ETH futures listed on the CME exchange.
$1.73 Billion in Short Positions: What the Data Shows
According to the latest Commodity Futures Trading Commission (CFTC) disclosures, hedge funds now hold a $1.73 billion short position in Ethereum futures on CME. This makes ETH one of the most shorted digital assets by professional traders in mid-2025.
The build-up of shorts does not necessarily indicate bearish sentiment. Instead, institutional players are executing a sophisticated market-neutral strategy known as a basis trade.
Understanding the Basis Trade on Ether
A basis trade involves shorting ETH futures on CME while simultaneously buying spot Ethereum through ETFs or exchanges, locking in the difference between the two markets. This arbitrage opportunity arises when futures trade at a premium to the spot price due to rising demand or market structure.
Traders performing this strategy can earn an annualized yield of up to 9.5%, regardless of the asset’s price direction. This return comes from the premium embedded in the futures price over spot ETH.
ETF Inflows Signal Massive Institutional Interest
Spot Ethereum ETFs have seen record inflows, adding credibility to the long side of the basis trade. On a recent Thursday, inflows reached $421 million in a single day, marking the highest daily inflow recorded so far.
In total, over $12 billion in assets are now held across various ETH ETFs, illustrating growing institutional confidence in Ethereum’s long-term value.
Boosting Yield with ETH Staking—But Not for ETF Holders
For traders who directly buy and hold spot ETH outside of ETFs, there’s an additional yield opportunity. By staking Ethereum, holders can earn an extra 3.5% annually on top of the basis trade return.
However, this yield is not accessible to ETF investors, as custodial services are managed by the ETF providers and do not support staking mechanisms.
A Market-Neutral Strategy in a Volatile Market
The basis trade in Ethereum is offering a rare opportunity: double-digit returns with limited price exposure. With ETH ETF inflows surging and institutional short interest peaking, hedge funds are using this strategy to profit from volatility without taking a directional bet.
This structured trade reflects a broader maturity in the crypto derivatives market and signals that Ethereum is no longer just a speculative asset—it’s part of a complex financial system used by the world’s largest investors.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.