Ethereum is facing a mix of sentiments that could shift its direction. Some are betting against it, others are making big investments, and even political figures have started weighing in.
With so many things happening at once, it’s hard to tell whether this is a sign of trouble or just another shift in the market.
What’s going on behind these decisions, and what could it mean for Ethereum’s future? The details might not be as straightforward as they seem.
Ethereum Foundation Expands Its DeFi Exposure
The Ethereum Foundation’s recent $131 million transfer into a multi-signature wallet signals a more active role in DeFi. This follows a 50,000 ETH allocation last month, suggesting a broader strategy to diversify holdings and generate returns.
In the past, the foundation focused on research and development rather than financial strategies. This shift could be a response to Ethereum’s underperformance against Bitcoin or an attempt to strengthen confidence in its ecosystem.
The move also follows criticism from figures like Kain Warwick, who argued that the foundation had ignored DeFi despite its role in driving Ethereum’s growth.
Whether this is a genuine effort to support DeFi or a financial strategy remains uncertain. What is clear is that the foundation is taking a more active approach to treasury management, which could have long-term implications for Ethereum’s market position.
Hedge Funds Increase Short Positions on Ethereum
Ethereum’s price remains under pressure as short positions have surged by 500% since November 2024, reaching a record 11,341 CME futures contracts. Hedge funds have aggressively bet against ETH, with the latest data showing a 40% increase in shorts within a week.
The Kobeissi Letter has pointed out a strong correlation between heavy shorting and major price crashes in Ethereum’s history.
A recent example occurred on February 2, when ETH fell 37% within 60 hours after President Trump’s tariff announcement. Analysts compared the drop to the 2010 stock market flash crash, as over $1 trillion was erased from the crypto market.
Despite Ethereum’s strong network fundamentals, its price action continues to lag behind Bitcoin. Since early 2024, Bitcoin has gained over 100%, while Ethereum has barely moved beyond 3.5%.
As a result, Bitcoin’s market cap is now six times larger than Ethereum’s, a level not seen since 2020.
The increase in short positions suggests that many institutional traders expect Ethereum’s price to decline further. However, if positive catalysts emerge, a short squeeze could force liquidations, pushing ETH higher in a rapid reversal.
Political Influence and Institutional Movements
Eric Trump’s recent endorsement of Ethereum has added another layer of complexity to the situation. He stated that it was “a great time to buy ETH,” only to later edit his tweet to remove the phrase “you can thank me later.”
At the same time, World Liberty Finance (WLF) accumulated 86,000 ETH, raising its total holdings to $421 million. However, on-chain data shows that WLF later moved millions of dollars worth of ETH to Coinbase, Lido, and Gnosis, indicating a possible plan to sell.
This raises questions about whether Trump’s statement was a genuine endorsement or a strategic move to influence sentiment.
The connection between political figures and institutional market movements is not new, but the impact of such events on Ethereum’s long-term stability remains uncertain.
If WLF’s transfers lead to a large-scale sell-off, Ethereum’s price could face additional pressure. However, if the assets are being redistributed for staking or other DeFi activities, the impact may be less severe than it initially appears.
Conclusion
Ethereum’s position in the market remains uncertain as institutional movements, growing short positions, and political influence continue to shape its outlook.
The Ethereum Foundation’s move into DeFi suggests confidence in its ecosystem, but the increasing number of short positions highlights market scepticism. Meanwhile, Eric Trump’s statements and large institutional transactions introduce further uncertainty.
If the foundation’s DeFi participation helps generate stable returns, it could strengthen Ethereum’s position. However, if institutional selling continues and Bitcoin maintains its dominance, Ethereum may struggle to regain momentum.
The coming months will be critical in determining whether Ethereum can stabilise or if further declines are ahead. Market sentiment remains fragile, and the balance between bullish institutional moves and growing short pressure will define its path forward.