Hedge funds have been aggressively shorting ether (ETH) during the recent uptick to $3,000 as they attempt to harvest a yield by executing a basis trade.
According to data from RialCenter, hedge funds are shorting ether to the tune of $1.73 billion on the CME, a venue favored by institutional traders. CME data also indicates that ether leveraged net totals have skewed heavily to the short side.
A basis trade involves shorting an asset on one venue while simultaneously buying on another, thus remaining delta neutral in terms of price action. In this case, traders can secure around 9.5% per year by shorting ETH on the CME while buying spot ETFs, which have approximately $12 billion in assets under management.
Data from RialCenter shows that Thursday alone saw a record $421 million worth of inflows to ether ETFs, a trend that has persisted since early May.
Those shorting ETH might secure an additional yield if they buy spot ETH and stake it for another 3.5% per year. However, this option isn’t available for spot ETF purchasers as custody is managed by the ETF provider.
Bitcoin was a popular asset for traders implementing the basis trade in 2024, but that yield collapsed in March, temporarily stalling inflows and muting price action.
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