Ethereum, the second largest cryptocurrency by market cap, has seen its price and market cap battered for some time now due to large sell-offs.
The price of ETH has gone down almost steadily for the past four months and observers don’t seem to see an end to that trend soon. Traders are now shorting on Ether like never before.
On Wednesday the number of short orders placed on the digital asset reached a new record high, according to a report by Coindesk. The ETH/USD shorts on Bitfinex reached 248,247 on Wednesday surpassing the previous record high 247,611 which was set last Friday. These numbers show an increase in shorts of more than 200 percent in the past four weeks, according to the report.
When shorting, traders borrow assets that they do not own and sell at the current market price to rebuy the assets at a lower price in the future and return the borrowed asset. Usually, the trader anticipates the price of the asset will decrease in the short-term, usually a few days or weeks.
This can be risky especially when the downtrend reverses and the asset is worth more than when they are borrowed. ETH/USD charts on Bitfinex from TradingView show an extreme negative positioning which is often followed by a swift reversal. Ether is also in an oversold position which again indicates it is expected to change its pattern.
Is there an End in Sight for ETH’s misery?
$300 was seen as the bottom until it slumped to $200, and then a yearly low below $170. The number of shorts indicates the market doesn’t expect a sudden bounce-back soon.
A lot could depend on Bitcoin and the overall state of the cryptocurrency markets. If BTC—with a market dominance nearing 60%–could drag ETH into more woes if it dips below $6,000.