After earning $580,000, why did I invest another $1,000,000 to short Ethereum?

Back to the Market: A New Shorting Decision

After two months of profit, this seasoned trader re-entered the market, initiating a new round of short positions on Ethereum with an investment of $1 million. This is not a spur-of-the-moment decision but based on an in-depth analysis of market structure — he believes Ethereum’s price will continue to decline.

Over the past two months, the trader has accumulated over $500,000 in profits by shorting Ethereum and other altcoins at market highs. Ten days ago, he reopened a short position on Ethereum. When Ethereum dropped to $2,650, he closed part of his position, but as the price rebounded, he re-established the short. Currently, his average entry price is $3,133, with a total position worth about $1 million and an unrealized profit of approximately $56,000.

The Logic of Shorting: Five Key Bearish Arguments

1. Exhaustion of Marginal Buyers

What is the core issue in the current crypto market? A lack of new marginal buyers. Most potential entrants have already entered, and the market is in a highly unstable phase. Under these conditions, the momentum to sustain price increases is rapidly diminishing.

Initially, the market widely expected a rebound and a “altcoin season” in Q4. But a key question is: if everyone is waiting for a rebound, who will buy to push prices higher? The answer is no one. This suggests that sellers may actually be the true marginal force.

2. Pressure at Critical Time Points: January 15

January 15 is not just a date for a company’s board dividend decision; more critically, it could be the deadline for delisting a major enterprise. If large Bitcoin holders are forced to delist, it could trigger billions of dollars in outflows and massive selling pressure.

This systemic risk cannot be ignored. Once it occurs, it could trigger panic in the market, as traders test this line of defense.

3. Analysis of Incentive Mechanisms of Large Institutions

A well-known Bitcoin accumulator has designed a compensation mechanism that grants additional rewards when Ethereum reaches certain market share thresholds. According to public information, when Ethereum’s holdings reach 4% of the market, he receives 500,000 shares; at 5%, the reward doubles.

What does this mechanism imply? Before January 15, he has a strong incentive to continue buying actively. But once the target is reached or the time approaches, this incentive will significantly diminish. At that point, the market will lose a key support, and prices may adjust rapidly.

4. Cautionary Lessons from Historical Comparisons

Over the past five years, a well-known Bitcoin buyer bought from $10,000 to $85,000, pushing Bitcoin’s price up 8.5 times. But another institution, in just five months, bought over 3% of Ethereum but only pushed the price from $2,500 to $2,900 — a mere 16% increase.

What does this indicate? Every time Ethereum rises, early holders are continuously selling. This makes Ethereum more like a liquidity tool rather than a long-term asset. It is an important warning signal.

5. Reassessment of Fair Value

This institution estimates Ethereum’s fair value range at $12,000–$22,000, but this valuation is controversial. Based on on-chain activity, actual user numbers, and market maturity, Ethereum’s true fair value might be between $1,200 and $2,200.

The current price around $2,900 is mainly supported by ongoing institutional buying. But is this support sustainable? Once buying stops, all gains could be quickly reversed.

The Truth About the Ethereum Market: Technology ≠ Investment Returns

The Dilemma of User Reality

Although the Ethereum network continues to expand and Layer 2 solutions reduce transaction costs, an undeniable fact remains: the actual number of users actively using Ethereum is far less than promotional data suggests.

The key question is: does increased on-chain activity mean the entire world’s financial activities are shifting to Ethereum? Not sufficiently. The logic is still incomplete.

Technology Advantages Do Not Equal Asset Appreciation

This marks the gradual maturity of the crypto market — recognizing that excellent technology does not necessarily lead to excellent investment returns. A well-known payment company built its own blockchain based on a specific protocol, which may be positive for the company’s equity, but will the underlying protocol’s tokens benefit? Not necessarily.

Market participants need to learn to distinguish between “technology products” and “assets.” They are fundamentally different.

Market Psychology and Institutional Behavior

The Dissipation of the “Perceived Safety Effect”

When the market knows that a large institution is continuously buying, short-term traders develop a psychological sense of security. During price declines, they assume this institution will support the price, so they tend to hold rather than sell. This psychological support, while real, is limited in duration.

Once this institution’s buying capacity begins to wane, the psychological support will quickly collapse.

The Current Market Is a PvP Game

The crypto market now resembles a player-versus-player (PvP) competition, with no clear structural buyers. Although some institutions continue to inject funds, the trend is that capital is slowly flowing out of the ecosystem. This explains why recent price swings have been so volatile — the market is searching for equilibrium.

Trader Self-Reflection

Past Excessive Optimism

This trader admits that years ago he was extremely bullish. He predicted Ethereum would reach $10,000 and held long-term. But the experience of falling from $4,000 to $900 taught him a painful lesson: Even the best technology cannot guarantee investment returns.

The 11-week bear market decline made him realize that the market can always be worse. He thought there would be a rebound in week 6, but it continued to fall for another 5 weeks.

Shift in Trading Philosophy

From a simple holder to a trader, his methodology has also changed. He no longer relies on charts or intuition but analyzes market movements based on capital flows and data.

For example: when an institution begins large-scale buying, the shorting window opens; when the buying momentum might stop, the short position should be expanded.

Risk Warning and Market Status

The Market Could Further Deteriorate

Many cannot imagine the market accelerating downward, but history repeats itself. Holding cash and waiting for better opportunities is a rational strategy — especially when systemic risks exist.

Without preemptive selling, it’s difficult to realize profits. This is a harsh reality for most traders.

Current Market Description

The current market situation can be understood as follows: institutions push prices higher through large-scale buying, while market participants gradually realize that this rise may be beyond what fundamentals support. Ethereum’s true value could be far below the current price, and this growing awareness will become a downward driving force.

This is precisely the direction that short-sellers are betting on.

Core Conclusion

When institutional buyers stop or exit the market, the long-awaited decline could happen instantly. Shorting Ethereum is not a negation of technology but a rational assessment of price. Based on an in-depth understanding of capital flows and incentive mechanisms, this trader believes Ethereum still has room to fall further.

Shorting Ethereum is a relatively simple and effective strategy — especially when you can identify the limits of institutional buying power and the market’s shift from excitement to rationality.