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Ether Sees Record Short Build up as Hedge Funds Pile on Basis Trade
Traders can capture an annualized yield of up to 9.5% by shorting ETH on the CME exchange.
Updated Jul 14, 2025, 1:59 p.m. Published Jul 14, 2025, 10:49 a.m.
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What to know:
- Hedge funds have built a $1.73 billion short position on ether (ETH) CME contracts, using a basis trade strategy to earn yield during ETH’s rally to $3,000.
- The trade involves shorting ETH futures on CME while buying spot ETFs, capturing an annualized yield of 9.5%, with ETH ETFs seeing record $421M inflows in a single day.
- Traders can enhance returns by staking spot ETH for an additional 3.5% yield.
Hedge funds have been aggressively shorting ether during the recent uptick to $3,000 as they attempt to harvest a yield by carrying out a basis trade.
Hedge funds are shorting ether to the tune of $1.73 billion on the CME, a venue favored by institutional traders, according to data from the Block, which cites the CFTC. CME data also shows that ether leveraged net totals have skewed heavily to the short side, according to X account zerohedge.
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Ether leveraged shorts going all-in: biggest short on record pic.twitter.com/PYuDvJdMhW
— zerohedge (@zerohedge) July 13, 2025
A basis trade involves shorting an asset on one venue whilst simultaneously buying on another, 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, of which there is around $12 billion in assets under management.
Data from Coinglass shows that on Thursday alone there was a record $421 million worth of inflows to ether ETFs, a trend that has been ongoing since early May.
Those shorting ETH could secure an additional yield if they buy spot ETH and stake it for a further 3.5% per year. It's worth noting that this option isn't possible for spot ETF purchasers as custody is handled by the ETF provider.
Bitcoin was a popular asset for traders carrying out the basis trade in 2024 but that yield collapsed in March, which temporarily stalled inflows and muted price action.
