Ethereum's Largest Short: A Trillion-Dollar Institution with Zero Holdings

As BlackRock and JPMorgan are actively establishing their businesses in the Ethereum ecosystem, having zero holdings is no longer a "choice," but rather a position.

Written by: Fernando Pertini

Compiled by: Saoirse, Foresight News

Wall Street has begun to build within the Ethereum ecosystem, yet the vast majority of investment portfolios still maintain zero holdings.

André Kostolany once made a market observation that I greatly admire: "In the stock market, 2 plus 2 never equals 4, but rather 5 minus 1. You just need to have a strong heart to endure that 'minus 1.'"

Ethereum investors are all too familiar with this "minus 1."

After five years of consolidation and fluctuations, hopes have repeatedly been dashed, and the narrative of "Ethereum is dead" has been incessantly echoed. New public chains have emerged one after another, claiming to replace Ethereum. With the market experiencing wild fluctuations, even long-term investors cannot help but doubt their initial choices.

This summer, the situation began to change. I am not referring to another wave of emotional turbulence within the crypto community, but rather the real traditional financial institutions have started to implement Ethereum-related businesses.

Robinhood launched a Layer 2 network for Ethereum. In just six weeks, the total locked value surpassed $1 billion. Revolut, with over 80 million users, issued a euro stablecoin on Ethereum.

Two tokenized money market funds under JPMorgan Asset Management have a combined scale exceeding $800 million on the Ethereum mainnet. Crédit Agricole issued a euro stablecoin on Ethereum and used it to complete the subscription settlement for a tokenized money fund from Allianz. Japan has seen the birth of its first trust-type yen stablecoin built on Ethereum. Neuberger Berman has also launched its first tokenized fixed-income fund on Ethereum.

Then BlackRock officially entered the game. Not by releasing a podcast or merely stating that "blockchain has great potential," but by directly launching tangible products. BlackRock has launched multiple Ethereum tokenized funds; shortly after, it announced a partnership with JPMorgan Kinexys to tokenize part of its European institutional cash series (with a management scale of $311 billion as of June 30) on Ethereum.

Morgan Stanley introduced Ethereum products with staking features. Fidelity submitted an application to add staking capabilities to its Ethereum ETF. Open USD confirmed that it was deployed on Ethereum from the outset, with over 140 participating enterprises in the ecosystem.

When a series of events occur in succession, it is no longer a coincidence, but rather a set of established financial structures.

Vlad Tenev refers to this as the global tokenization supercycle. Tom Lee's perspective goes even further: the term "tokenization supercycle" may even underestimate the impending transformation. I believe he has a point.

Tokenization is merely the first layer of visible change. Behind it, there are stablecoins, programmable collateral, 24/7 trading markets, and instant settlements. Looking ahead, AI entities will be able to autonomously execute trades, negotiate, and make payments to each other. No longer constrained by bank operating hours, free from the T+1 settlement mechanism, phrases like "the wire transfer is expected to arrive tomorrow" will likely become obsolete, and manual intervention to trace the transfer's whereabouts may no longer be necessary.

Does this sound familiar?

The first wave of AI market activity revolved around computing power. The next round may require a currency that is inherently rooted in software systems.

Bitcoin has helped Wall Street understand the value of digital scarcity; Ethereum will help Wall Street comprehend the value of programmable capital.

The following point is particularly thought-provoking.

On July 1, the price of Ethereum was approximately $1,560, rising to about $2,450 by the end of August, a significant increase. The scale of institutional business surrounding Ethereum continues to expand, with tangible products becoming increasingly specialized, and application scenarios moving beyond theoretical discussions. However, the actual Ethereum holdings of traditional institutions remain pitifully low.

For many years, having no allocation to Ethereum in investment portfolios has been the safest career choice in the financial industry. No one would be fired for missing out on Ethereum. Fund managers do not need to explain to the investment committee why there is no Ethereum in their portfolios.

But when BlackRock, JPMorgan, Robinhood, Revolut, Fidelity, Morgan Stanley, Crédit Agricole, and Neuberger Berman all enter the Ethereum space, the situation changes.

One day, the questions from the investment committee will completely reverse: from "Why should we allocate to Ethereum?" to "Wait, please tell me again, why do we have no allocation at all?"

This is the short squeeze I am truly concerned about. It has nothing to do with publicly disclosed short positions, perpetual contracts, or those trading with 50x leverage at 3 AM.

The largest short position in Ethereum may very well be the various investment portfolios, amounting to trillions of dollars, that still hold zero ETH.

Take a moment to reread this and think carefully about this statement.

If you actively short Ethereum, you know you are bearish on it. But if you manage a traditional investment portfolio and choose zero Ethereum allocation while the financial system increasingly builds on Ethereum, you will eventually realize that zero allocation itself is also a position. This is the most thought-provoking aspect of the entire situation.

The winds in Washington are also changing. The focus of industry discussions has shifted from "Should cryptocurrencies be integrated into the financial system?" to "Okay, how do we truly integrate them?"

The CLARITY Act remains unresolved and may be postponed again. Almost everyone expects this.

However, if the bill makes real bipartisan progress—this has happened multiple times in American history—the situation will be entirely different. If the bill fails again, it will not cause much of a shock; but if it achieves substantial breakthroughs, it will force institutions to quickly reassess their timelines and adjust their positions.

My core logic does not rely on the passage of the CLARITY Act; its passage will only accelerate the entire process.

Kostolany also mentioned a principle that investors often forget: the market rarely delivers returns in a straight line according to a single logic. First, an idea is born, then there is a long wait, often accompanied by growing pains, and much later, everyone will come out to explain that the outcome was inevitable.

Ethereum will likely experience multiple "minus 1" corrections in the future, which I have long anticipated.

But look at the present: Wall Street is no longer entangled in whether this underlying infrastructure is worth paying attention to; instead, it is actively building businesses on top of it. Asset allocators are still on the sidelines, debating whether to enter the market. But the reality remains: the vast majority of investment portfolios still have zero allocation to Ethereum.

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