Turning Point Approaching: “Net Long vs. Net Short” Structure Shows Historically Rare State

Compiled by Odaily (@오데일리차이나); Translated by Azuma (@아즈마_에스)

Editor’s Note: The market continues to fluctuate at low levels. Will the future direction be up or down? Kyle Soska, Chief Investment Officer of Ramiel Capital, analyzed the long-short structure of the perpetual futures market in his latest article and attempted to provide an answer by examining changes in market risk appetite.

The highlight of Kyle’s analytical method is that by incorporating data disclosures from Ethena, he excluded the basis positions and hedging positions that introduce some noise regarding market direction, focusing only on net longs and net shorts which more directly determine market trends. His ultimate conclusion is that the current market’s net long vs. net short structure is in a historically rare state. While this could become the new normal, observing other asset markets reveals that such a trend is generally extremely difficult to sustain long-term. In other words, a turning point may be imminent.

The following is the original content by Kyle Soska, compiled by Odaily.

The 암호화폐currency market has been in a risk-off state for several consecutive months. I have been sifting through various forms of market data, hoping to find signs of a potential market inflection point. This article will delve into the market structure of perpetual futures and, combined with data from the Ethena transparency dashboard, explore changes in market risk appetite.

Ethena’s current deployed capital has fallen to its lowest level in years, only 71% of its 2025 low point. This is not a critique of Ethena but rather a reflection of the current market state. Directional shorts have nearly equaled directional longs — an extremely rare structure in the crypto market that has historically been difficult to sustain long-term.

The cryptocurrency market has long been characterized by extremely high asset volatility and the widespread use of high leverage by traders. Since the BitMEX era, perpetual futures have become the highest-volume product, with trading volume typically 5 to 20 times that of the spot market. As the core hub providing leverage to retail traders, observing the perpetual futures market provides a good reflection of the overall risk appetite in the crypto market.

Ethena provides us with a unique window into the crypto derivatives market. As shown in the figure below, Ethena’s strategy essentially executes a carry trade in cryptocurrency. The logic is very simple — when a trader goes long on a crypto asset, Ethena acts as the counterparty and goes short. Simultaneously, Ethena buys an equivalent amount of the asset in the spot market to hedge its short position.

In a sense, Ethena provides “Leverage-as-a-Service”:

• Traders want exposure to rising crypto asset prices but lack sufficient capital;
• Ethena has capital but has a lower risk appetite;
• Therefore, traders borrow capital from Ethena via perpetual futures, and their cost is the “basis” + “funding rate.”

According to the structure of perpetual futures, every long position corresponds to a short position; they are always matched 1:1. Each open interest contract represents a cash flow agreement between two parties. The exchange’s role is to match these contracts, ensuring each contract always has a sufficiently funded long and short holder. The matrix below shows the four possible outcomes when an exchange matches contracts.

Every trade has a buyer and a seller. When the buyer and seller of a contract are both long or both short, the exchange only needs to transfer contract ownership between the two parties. This transfer does not create or destroy any contracts. When the buyer is long and the seller is short, a new contract must be created, with the buyer receiving the long position and the seller receiving the short position, thereby increasing open interest by 1. Conversely, if the seller is long and the buyer is short, the exchange can unbind both parties from a specific contract and delete it, thereby reducing open interest by 1.

So, who holds these contracts in a typical market? Essentially, there are four types of contract holders:

• Directional longs seek exposure to price increases. They are risk-seeking participants, and their risk demand depends on the strength of market risk appetite.
• Directional shorts consist of two types of participants: those who want exposure to asset price declines, and those who want to hedge their holdings in a more tax-efficient way. For example, VCs and company employees who receive compensation in tokens often want to hedge future token unlocks to lock in current prices. For many altcoins, market liquidity is often too thin to support effective direct hedging, or the relevant market may not even exist. In such cases, companies like Cumberland, Wintermute, FalconX, Flowdesk, and Amber can construct a dynamically managed synthetic position: by shorting several highly liquid and correlated assets (like Bitcoin and Ethereum) to hedge exposure to a less liquid asset (e.g., Monad). This category also includes projects like Neutrl, which use this hedging structure as a yield strategy.
• Basis traders are opportunistic shorts. They are not concerned with price direction but voluntarily match excess demand from directional longs when market imbalances occur. In most market environments, long demand often exceeds short demand, and their role is to fill this gap. Their scale is typically highly elastic and can expand or contract rapidly.
• Perp-Perp arbitrageurs simultaneously hold long and short positions in perpetual futures. Their role is to connect prices between different perpetual futures markets and eliminate any minor price differences after deducting trading fees. Their longs and shorts are perfectly matched at any given moment.

According to the structure of perpetual futures, each contract must be a 1:1 long-short match, so we know that “directional longs + arbitrage longs = directional shorts + basis shorts + arbitrage shorts”; furthermore, due to the arbitrage structure, we also know that “arbitrage longs = arbitrage shorts”; canceling this relationship from the first equation yields “directional longs = directional shorts + basis shorts.”

Ethena provides us with a proxy metric for all basis shorts, thereby helping us observe the structural comparison between directional longs and directional shorts.

The chart below shows the balance sheet disclosed by Ethena, dividing assets into cash and deployed capital, with a time range from December 27, 2024, to March 7, 2026.

In 2025, following the launch of the TRUMP token in January, the market quickly entered a risk-off state and continued to decline during the initial tariff discussions and the “Liberation Day” event in April. During this period, Ethena’s deployed capital plummeted from over $5 billion to about $1.1 billion, a drop of over 75%.

Remember, Ethena’s deployed capital can be seen as a proxy for excess long demand in the market. While Ethena is not the only institution executing such trades, its scale is very large (at times accounting for about 25% of the total on Binance and Bybit). As long as Ethena has excess cash on hand, it would theoretically expand its positions to fill unmet long demand in the market. This means that while overall long demand may not have fallen by 75%, the excess long demand not absorbed by directional shorts indeed decreased by that much.

The chart below shows the change in Ethena’s balance sheet deployed capital relative to total size, the 2025 low, and the 2025 high.

Observing the current market, Ethena’s deployed capital across all markets (BTC, ETH, SOL, BNB, XRP, HYPE) is $790 million. This figure is only 71% of the 2025 low point and 12.9% of the pre-October 10th high. This number is not a critique of Ethena but a reflection of the overall market state — net long demand in the current market is at a historically low level.

주목할 가치가 있는 것은 during the market crash when Bitcoin fell to $60,000, Ethena still deployed over $2 billion in capital. Yet, just one month later, after February 8, 2026, deployed capital plummeted by 60%.

The chart below zooms in to show Ethena’s deployed capital and Bitcoin price movements since January of this year.

Since BTC fell to $60,000, Ethena’s basis positions have shrunk from over $2 billion to less than $800 million. This change is quite intriguing because overall market prices have been relatively stable during this period. There are three possible explanations for this situation:

• Basis trades from the February crash gradually unwinding. These trades were profitable but unsustainable (basis became more negative, but funding rates were also negative);
• Increased directional short and hedging demand, squeezing out opportunistic basis traders;
• Insufficient demand for leveraged long exposure.

In my view, the reality is primarily a combination of the first two possibilities, with the third having a smaller impact. As shown in the chart above, during the period when Ethena was unwinding its positions, the open interest for Bitcoin and other major assets remained generally stable. Meanwhile, funding rates remained negative for a considerable time, and coins like SOL had cumulative negative funding rates across multiple exchanges. This indicates that market demand for directional shorting or hedging exposure is rising.

If I had to guess, I think many small and medium-sized crypto companies and VCs are experiencing a crisis. Think of those low-market-cap projects (like Eigen, Grass, Monad, etc.). There could be hundreds of such tokens, and each project corresponds to multiple VCs, a project team, a company treasury, and numerous employees. VCs need to limit losses and lock in profits to meet fund investment requirements, and project companies need to protect their operational capital reserves and employee headcount. This creates a situation where all participants must extract as much yield as possible from limited resources, and the solution often becomes a “crowded trade”: actively managed structured products shorting a basket of correlated assets.

We can see some signs of these structured products in some of ETH’s sharp short-term rallies, as these rallies often trigger short covering and drive synchronous increases in many small and mid-cap crypto assets. Another piece of evidence is the noticeable crowding out of opportunistic basis trades (like Ethena) from the market.

Whatever the reason, we can ascertain that for almost the first time in crypto market history, directional longs and directional shorts have nearly reached complete parity.

Theoretically, there is no reason why this state cannot become the new normal, or why this structure must change. But if we observe markets in other asset classes, we find that such a trend is very rare to sustain long-term.

이 글은 인터넷에서 퍼왔습니다: Turning Point Approaching: “Net Long vs. Net Short” Structure Shows Historically Rare State

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