Re-entering the Market: The $1 Million ETH Short Position and Its Reasons

In the past two months, shorting Ethereum has yielded over $500,000 in profit. Now, there is a new market opportunity for a bigger move: a $1 million short position in ETH with an average entry price of $3,133 and current unrealized gains of $56,000.

Why Re-Short ETH?

The decision to reopen a short position is based on in-depth analysis of market dynamics. The key to understanding ETH's movement lies in identifying the “marginal buyer” and “marginal seller” within the ecosystem.

Currently, the main support for ETH's price comes from digital asset treasury companies (DATs), especially Tom Lee and his Bitmine. But this support has limits. Once their buying power is exhausted or their strategy shifts, ETH's price could fall rapidly.

It’s also important to note: there are almost no true structural buyers in the market today. Most funds come from other players with their own agendas, not from organic adoption or user demand.

The Tom Lee Factor: Support and Threat

Tom Lee provides $200 to $300 million in weekly buying pressure. This is a significant number in the current market environment. But this strategy aims not only to push prices higher but also to gain personal and corporate benefits through equity incentives.

According to Bitmine's SEC filings, Tom Lee has a cache: when ETH holdings reach 4% of the market share, he receives 500,000 shares (worth $15-20M); at 5%, the reward doubles. This incentive explains why he has been buying so heavily before the year's end.

However, ETH's rise from $2,500 to the current $3,310 is not sustainable at the proper price. When prices go up, original holders sell, turning ETH into an exit liquidity tool rather than a long-term asset.

The High Risk: January 15, 2026, and Beyond

January 15, 2026 is a critical date: it’s the board decision day for Bitmine bonuses, but more importantly, it’s also the possible delisting deadline for MSTR (MicroStrategy). If MSTR gets delisted, it could trigger billions in outflows and significant selling pressure across the market.

Scenario:

• Before January 15, Tom Lee continues aggressive buying due to the incentive structure
• After the deadline, his motivation to continue diminishes (marginal benefit decreases)
• If MSTR is delisted, panic could ensue, triggering cascade selling

The True Fair Value of ETH

The market prices based on expectations. But this price may not reflect intrinsic value. Analyzing on-chain adoption, transaction volume, and real user activity: very few users are utilizing ETH for its original purpose.

Ethereum’s platform is technologically excellent, but technological superiority does not automatically lead to higher asset prices. Market maturity involves understanding that these are different layers.

The market expects that “when global finance moves to blockchain, ETH’s market cap will reach trillions.” But this logic is planned. Many companies (Robinhood, JPMorgan) use blockchain without requiring significant token price appreciation.

Based on various factors:

• Historical bitcoin-ETH price relationship
• Actual on-chain usage metrics
• Management and institutional investor behavior patterns

A realistic fair value range for ETH is $1,200 to $2,200, lower than the current $3,310.

The Cryptocurrency Market Today: PvP Competition

This is no longer a “bulls vs bears” market. It’s a “player versus player” (PvP) competition with no clear structural advantage. The main participants (DATs, large whales) profit through reflexivity—when prices rise, retail investors buy more, pushing prices higher. But when momentum wanes, both sides can become sellers.

Critical insight: When altcoins fall, ETH fundamentals also weaken because many funds are in yield-seeking mode on on-chain applications. The October 10 liquidation event was the perfect catalyst to observe this.

Strategic Position Sizing and Market Timing

A short position is not a one-time bet. It’s constructed based on:

1. Identifying the peak of the buying cycle (likely near)
2. Monitoring the cash reserves of major players (Tom Lee’s remaining firepower)
3. Anticipating changes in incentive structures (January 15 turning point)
4. Preparing for an unwind of exit liquidity

In the previous bear market, ETH rose for 11 weeks before declining. Premature shorts were wiped out. Therefore, market timing is crucial, not just direction.

The Action: Simple but Effective

Shorting ETH is a straightforward strategy:

• Monitor buying pressure from DATs
• When their motivation wanes or is exhausted, the unwind will be swift
• Those with cash reserves have an advantage in a bear market

This is not bearish for the long term. Crypto will have a future. But current pricing is not justified by fundamentals, and the bubble needs to unwind before a sustainable recovery.

True wealth is accumulated when people buy at low prices, not at hype peaks. The current phase is an opportunity for patient traders with strategic vision.