Ethereum’s test of the $1,500 level earlier this year marked a turning point in how institutional traders positioned around the second-largest cryptocurrency, with hedge fund short interest on CME futures hitting record levels before a sharp reversal in sentiment sent prices surging months later.

Record Hedge Fund Shorts Set the Stage

In early February, hedge funds built their largest-ever net short position in Ether CME futures, according to CoinDesk reporting on CFTC Commitments of Traders data. The positioning raised questions about whether the shorts reflected outright bearish bets or basis-trade strategies designed to capture the spread between spot and futures prices.

The CFTC’s own filings confirmed the scale of…