A report has been making the rounds, claiming one of the biggest hedge funds in the world has a strategy of shorting Ethereum (ETH) with a $3.1B directional short position. The fund, allegedly Bridgewater, was seen as a potential target to attack that short position.
Allegedly, the Bridgewater hedge fund has a strategy of shorting Ethereum (ETH) with a $3.1B directional short position. A page from the fund’s filings suggests that shorting ETH is one of the fund’s main material positions.
Ever wanted to short squeeze the largest hedge fund in the world?
Allegedly, this is Bridgewater’s portfolio composition going around.
The alleged fund strategy leak was first distributed via a parody account, @Derivatives_ape, suggesting it may be real but not to be taken seriously. Others claim the fund is actually Citadel, another big name tied to the GameStop short squeeze.
The other reason is that even a position of $3.1B is relatively small compared to the supply of ETH available. While some traders may need to cover their positions, the effect would be limited. The narrative of an ETH short squeeze has been around for months, though for now, it has only worked in the short term to move the price by a few hundred dollars by attacking short positions. Currently, long liquidations are more active for ETH.
Skeptics showed that anyone could fabricate the report, though it was also possible that hedge funds owned ETH and hedged it by shorting it. Even the wording of ‘ETH Directional Short’ has raised doubts, though the alleged portfolio also tracks Bridgewater’s real positions.
The large-scale position was used as an argument by ETH maximalists, who expect a short squeeze to lift ETH at any one time. However, ETH markets are fragmented, and not all positions may be attackable. On spot exchanges, it may be easier for whales and traders to have an effect. If ETH starts expanding, mainstream markets can only be affected indirectly.
Bridgewater has $235.5B in assets under management, and the short position, while large, is not out of the fund’s scale. However, no crypto market participant has produced the actual report or other evidence of having an ETH short position.
ETH is indeed mostly shorted by mainstream traders, who have built up to $11.3B in short positions on the CME. However, the short positions are cash-settled and may not increase demand for ETH. On spot crypto exchanges, ETH short positions are under 30%, though close to their usual level. There are few conditions for a short squeeze despite the overall trend of ETH sliding against Bitcoin (BTC).
During the latest market shakedown, ETH traded at $2,672.78 while recovering slightly at 0.028 BTC. While there are hopes for a recovery, ETH is still incapable of generating enthusiasm for a large-scale short squeeze.
The recent speculative portfolio arrives at a time when the crypto market expects the bottom for ETH, as well as larger altcoins. In the case of a market reversal, ETH is expected to continue with more rapid expansion, finally triggering a short squeeze.
Bridgewater’s Ray Dalio signals BTC maximalism
Ray Dalio, the CEO of Bridgewater, has signaled his interest in crypto, though he has often taken the position of a BTC maximalist. Previously, Dalio has spoken of blockchain as a viable technology to simplify business.
ETH has become more volatile in recent months. It has given up on its narrative of ultra-sound money with appreciation similar to BTC. ETH retains inflation of nearly 0.7% a year, with sufficient new coins and tokens flowing into the market.
ETH demand from ETF funds is also relatively small, as the network has yet to signal its main role. Without the hype of the 2021 gaming and NFT market, Ethereum relies on DeFi for its use cases and is a utility chain for stablecoins.
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This articles is written by : Nermeen Nabil Khear Abdelmalak
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By Nermeen Nabil Khear 