Is Ethereum preparing for another selloff as traders continue building short positions despite recent market strength?

Ethereum’s late-August rally did not eliminate every major short position. On Aug. 24, Abraxas Capital, Fasanara Capital and Wintermute reportedly held combined short exposure of 138,569 ETH, then worth about $338 million. Although that amount may sound bearish, the positions require additional context.

The positions were associated with market makers’ hedging accounts, meaning they were not necessarily unprotected bets that Ether would fall. ETH traded below $2,400 during Sept. 3 before recovering above that level later in the day. Short exposure alone cannot establish whether another selloff or short squeeze will follow.

What do the large shorts really represent?

The reported positions belonged to Abraxas Capital, Fasanara Capital and Wintermute. Together, the firms held short exposure to both Bitcoin and Ether on Hyperliquid. Their Ether positions accounted for about $338 million of the more than $600 million combined total reported on Aug. 24.

A short position generally gains when an asset’s price falls. Yet professional trading firms often pair a derivatives short with spot holdings or another position that benefits when prices rise. The short can then reduce risk instead of serving as a direct forecast.

That distinction is important here. On-chain tracking showed that Abraxas was also withdrawing a large amount of Ether from an exchange while carrying its short book. That activity supports the possibility that at least part of the position was a hedge rather than an unprotected bearish trade.

Liquidation levels reduced immediate pressure

Two large Abraxas Ether shorts reportedly had liquidation prices near $3,958 and $4,008 when ETH traded around $2,440. Liquidation occurs when a trading platform forcibly closes a leveraged position after the account no longer meets its applicable margin requirements.

Those thresholds were more than 60% above the reported spot price. That distance helped the positions remain open during the August rally while more highly exposed short sellers were liquidated. The firms therefore did not require an immediate ETH decline to keep those positions open.

Liquidation prices are not permanent. They can change when collateral, account equity, leverage, or position size changes. The reported August levels describe the accounts at that time and should not be presented as their current liquidation thresholds.

Fun fact: The bearish case would be invalidated by a decisive break and sustained move above $2,550. In that case, ETH could leave the current range and continue toward the next liquidity zone at $2,600–2,700.

Ethereum’s rally has started to cool

Ether rose sharply during August and traded near $2,455 late in the month. It struggled to sustain a move above $2,550 and fell below $2,400 during Sept. 3 trading. However, ETH later recovered to approximately $2,498, illustrating how quickly live cryptocurrency prices can change.

Recent technical analysis has focused on approximately $2,370–$2,400 as a potential support area. A sustained move below that range could expose lower levels, while a recovery above $2,550 would weaken the immediate bearish setup.

These technical levels are guides, not guarantees. Cryptocurrency markets trade continuously, and a brief move below support does not establish a lasting decline. Price analysis is more reliable when considered alongside trading volume, daily closes, and broader market conditions.

ETF demand offers a mixed counterweight

U.S. spot Ether ETFs recorded approximately $189.15 million in net inflows on Aug. 19. At that time, it was their strongest daily result since Oct. 28, 2025. The funds added another $115.57 million on Aug. 24 as regulated investment products attracted fresh demand during the rally.

The inflow streak continued into September, although different data providers reported slightly different Sept. 1 totals. SoSoValue-based reports put the inflow at $10.95 million, while Farside Investors reported approximately $8.6 million.

On Sept. 2, the funds recorded approximately $48.1 million in net outflows, ending a 12-session inflow streak. Total net assets stood near $15 billion.

ETF inflows do not guarantee that Ether’s price will rise. Other holders may sell while derivatives positions move in the opposite direction. The Sept. 2 outflow did not erase the earlier inflows, but it showed that fund demand can reverse.

Short positioning can cut both ways

Heavy short positioning may reinforce a decline when sellers control the market, but it can also fuel a rally. If Ether rises far enough, exchanges may liquidate losing short positions, requiring exposure to be bought back and potentially adding upward pressure.

That process is commonly called a short squeeze. During the August crypto rally, nearly $2.7 billion in short positions were reportedly liquidated within 24 hours. The large institutional accounts discussed here remained open partly because their reported liquidation levels were far above prevailing prices.

Rising open interest alongside persistently negative funding rates can indicate increasing demand for short exposure, although neither measure predicts price direction by itself. Data from several accounts also cannot establish how the entire derivatives market is positioned.

Fun fact: Bitcoin frequently leads major market recoveries because it has the deepest liquidity, the largest market capitalization, and the strongest institutional infrastructure.

Macro conditions remain a major risk

Ethereum is also reacting to forces outside the crypto market. Rising Treasury yields and expectations for higher U.S. interest rates can reduce demand for riskier assets. Ether traded below $2,400 as rate concerns strengthened in early September.

The next U.S. jobs report may shift expectations for the Federal Reserve’s Sept. 16 decision. Strong labor data could support the case for higher rates, while weaker figures could ease some pressure on yields. Either outcome may quickly affect crypto prices and leverage.

That means a drop would not necessarily prove the large trading firms predicted it correctly. Their positions may be hedges, while the actual trigger could come from interest rates, broad market selling, or changing ETF demand. Several forces can produce the same price move.

What would confirm another selloff?

A convincing bearish signal would require more than the existence of several large shorts. Ether would need to remain below recent support, selling volume would need to grow, and ETF flows would likely need to weaken or reverse. Rising bearish leverage would add to that case.

The opposite signals would challenge the selloff view. Continued ETF inflows, stronger spot volume and a recovery above recent resistance could force more short sellers to reduce their positions. That combination could turn bearish positioning into support for another rally.

For now, Ethereum appears unsettled rather than committed to a deep decline. The large shorts deserve attention, but their likely hedging role limits what they reveal. Price confirmation, marketwide derivatives data and fund flows offer a clearer test than watching three accounts alone.

TL;DR

• Three firms reportedly held about $338 million in Ether shorts on Aug. 24.
• The positions appeared to include market-making or hedging activity, not only bearish bets.
• Ether slipped below $2,400 after failing to hold its late-August gains.
• A $48.08 million ETF outflow on Sept. 2 ended a 12-session inflow streak.
• Another selloff would need confirmation from price, volume, fund flows, and broader short positioning.

This article was made with AI assistance and human editing.

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