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

On May 16th, as per a CoinDesk report, Sui Chung, the CEO of the crypto index provider CF Benchmarks, stated in an interview: "The recent increase in the Ethereum price is primarily attributed to short covering—traders liquidating their bearish positions—rather than a robust bullish sentiment in the market." During the process of short covering, short sellers will repurchase the futures contracts they had previously sold. This action will boost market demand in the short term, generating upward price pressure. Chung pointed out that the premium (also known as the basis) of CME Bitcoin futures remains at a low level, suggesting that this rally is mainly driven by short covering. Chung further added: "In a more typical market situation, if traders begin to use leverage to establish new long positions, we typically observe the basis level rising. This phenomenon reminds us that not all price increases are driven by new demand; sometimes they only reflect position adjustments and risk reduction."