Analyst: Ethereum's recent rebound was driven by short covering, not solely by new demand

BlockBeats News, May 16th, according to a CoinDesk report, Sui Chung, CEO of crypto index provider CF Benchmarks, said in an interview: "The recent Ethereum price increase is mainly due to short covering—traders unwinding their bearish positions—rather than a strong bullish sentiment in the market."

During the process of short covering, short sellers will buy back the futures contracts they previously sold. This operation will increase market demand in the short term, creating upward price pressure.

Chung pointed out that the premium (also known as the basis) of CME Bitcoin futures is still at a low level, indicating that this rally is mainly driven by short covering.

Chung added: "In a more typical market scenario, if traders start using leverage to build new long positions, we usually see the basis level rise. This phenomenon reminds us that not all price increases are driven by new demand; sometimes they only reflect position adjustments and risk reduction."