Ethereum (ETH) is facing mounting pressure as investors ramp up short positions following Grayscale Investments' withdrawal of its Ethereum futures exchange-traded fund (ETF) application. A mere 3% price increase could trigger the liquidation of $345 million in short positions, indicating a bearish market sentiment. ETH's price has dropped 1.85% in the last 24 hours, trading at $3,010, close to a critical support level.

The surge in short selling comes as the US Securities and Exchange Commission (SEC) is expected to reject spot Ethereum ETFs by May 23rd, fueling uncertainty and skepticism among investors. Despite initial optimism, analysts now doubt the approval of spot Ethereum ETFs, aligning with the sentiment on crypto prediction platforms like Polymarket, where participants believe with 92% certainty that the SEC will reject the ETFs.

Ethereum's network usage is also a concern, with on-chain analyst James Check noting that token burning mechanisms cannot keep up with issuances to validators due to low usage. Crypto data platform Glassnode attributes Ethereum's underperformance to a delay in speculative interest from short-term investors. While some investors remain optimistic, predicting a potential breakout by the end of the year based on historical patterns, others expect consolidation and horizontal movement around the current support area.