Key Points
- Gold’s price rally has sparked hopes for an influx of liquidity into the altcoin industry, particularly Ethereum.
- Wall Street hedge funds have significantly increased their short positioning in Ethereum, potentially triggering a major short squeeze.
As Gold’s price reached a new all-time high during the Asian session on Monday, anticipation for a fresh wave of liquidity to flow into the altcoin industry, spearheaded by Ethereum (ETH), has grown.
The initial bearish sentiment towards cryptocurrencies from last week has greatly diminished in recent days, with Bitcoin’s price forming a potential reversal pattern, which could instigate a new bullish sentiment.
Wall Street’s Influence on Ethereum
A market research report from The Kobeissi Letter reveals that short positioning, driven by Wall Street hedge funds, rose by over 40% last week, based on the CFTC CME Ether cash leveraged net totals. Interestingly, the net short positioning in Ethereum has soared by more than 500% since November 2024.
A recent post by Eric Trump, VP of the Trump Organization, suggesting that now is an opportune time to add Ether to crypto portfolios, has amplified trading activity in the altcoin industry.
Ethereum’s Price Outlook
In the weekly time frame, Ethereum’s price, against the US dollar, has been consolidating in a horizontal channel ranging between $2,200 and $4k since March 2024. The large-cap altcoin, with a fully diluted valuation of about $318 billion and a 24-hour average trading volume of around $20 billion, must maintain above the support range between $2,200 and $2,622 to counteract potential selloff to $1,500.
However, the bullish sentiment for Ether is heavily supported by mainstream adoption by institutional investors. The increasing short positioning of Ether by Wall Street’s hedge funds will trigger the largest short squeeze in the history of altcoins.
If Ether’s price consistently closes above the support/resistance level around $3,500 in the near term, all the short positions will turn long and fuel a major bull rally.
Ethereum’s Strong Fundamentals
The Ethereum network remains the dominant player in the decentralized finance (DeFi) ecosystem, despite the emergence of highly competitive Layer One (L1) chains, led by Solana (SOL). According to market data provided by Defillama, the Ethereum network had a total value locked of about $56 billion and a stablecoins market cap of around $121 billion at the time of this writing.
Notably, Ether’s TVL is higher than the next four largest smart contract chains.
In addition, the Ethereum network has significantly benefited from the mainstream adoption of digital assets by institutional investors. The rate of cash inflow to US spot Ether ETFs has recently increased, thus raising the cumulative total net inflow to $3.18 billion.
