Hedge Funds Ramp Up Ether Shorts to Capture 9.5% Yield via Basis Trade

Hedge funds are aggressively shorting ether (ETH) as the price approaches $3,000, seizing the opportunity to lock in attractive yields through basis trading strategies.

According to CFTC data reported by The Block, hedge funds have built $1.73 billion in short positions on the CME, an exchange popular with institutional traders. Additional CME figures highlighted by zerohedge show ether leveraged net positioning skewed heavily to the short side.

The basis trade involves selling futures or perpetual swaps on one platform while simultaneously buying the underlying asset elsewhere, maintaining a delta-neutral position that avoids directional exposure. In this case, traders can earn an annualized yield of roughly 9.5% by shorting ETH futures on the CME while accumulating spot ether ETFs, which collectively manage around $12 billion in assets.

Fresh data from Coinglass shows a record $421 million in inflows to ether ETFs on Thursday alone, continuing a strong trend that began in early May.

Hedge funds can potentially enhance yields further by staking the spot ETH they buy, adding another 3.5% annual return. However, this strategy isn’t available to spot ETF investors because their coins remain under the control of the ETF custodian.

Bitcoin (BTC) was previously the basis trade of choice throughout 2024, but yields collapsed in March, causing inflows to slow and price action to flatten.