Ethereum Shorts Pile It On

Ethereum shorts on Bitfinex have reached another all-time high, totaling roughly US$100,000,000 million in fiat value at current Ether prices:

ETH/USD Shorts on Bitfinex

While the number of Ethereum shorted on Bitfinex has jumped by roughly 50% in the last week, the notional US dollar amount of this short position (approximately US$98 million currently) has only risen marginally (due to the decline in the ETH/USD price) over the same time frame.

With that being said short sellers in Ethereum have greatly increased their risk exposure by piling on as the price of Ethereum has declined; short selling offers a negative asymmetric risk profile to the short seller (you can only make 100% on a short, but you can lose much more than 100% of your original short position when a position rallies against you).

A similar spike in short positions on Bitfinex occurred in Bitcoin (BTC/USD) in early April:

BTC/USD Shorts on Bitfinex

This surge in BTC/USD shorts on Bitfinex closely followed the price action in Bitcoin between mid-February and early April (Bitcoin fell as BTC/USD shorts on Bitfinex rose). As Bitcoin began to rally aggressively on April 12th the BTC/USD short position on Bitfinex fell drastically.

Ethereum could be a coiled spring as it tests the big round number support level at $500. In addition, it’s important to note that ETH/USD has achieved its measured move downside target from the head & shoulders top pattern which formed in April/May.

 

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