There are always some data in the market that can be misleading—on the surface, it looks like there are massive short positions piling up, but the reality might be completely different.

The HYPE token recently provided a perfect example of this. On-chain data shows that accounts holding huge short positions are actually hoarding large amounts of spot tokens.

Take "BobbyBigSize" for instance—this guy opened a $51.5 million short position on Hyperliquid, but at the same time holds about $11.85 million worth of HYPE spot tokens. Even more extreme is "Abraxas Capital"—$71 million in short positions paired with $63 million in spot holdings, the two numbers are almost balanced. And this month, they’ve been steadily increasing their spot holdings.

What’s this maneuver? The answer is the classic hedging strategy.

If you’re truly bearish on a token, would you be shorting it while frantically accumulating spot? Obviously not. The logic with these whales is: use shorts to lock in downside risk, and use spot to capture upside gains. When the market is trading sideways, they can profit from both ends; even if the price crashes, losses on the spot holdings are offset by profits from the shorts. Risk is controlled, and they can still play the swings.

For ordinary investors, there are a few key points to note:

First, don’t be intimidated by short position data. Those massive shorts aren’t necessarily a sign that the market is about to tank—it’s often just big players balancing their risk. Actions like Abraxas continuously increasing spot positions are much more telling—it means they’re not planning to exit at all.

Second, when whales hold both spot and derivatives positions, it means they have the ability to cause sharp price swings at key levels, targeting high-leverage traders. If you happen to open a high-leverage position at those prices, you can easily get whipsawed.

Finally, remember this: the real warning signal is when whales start reducing their spot holdings in sync. At that point, shorts aren’t just a hedging tool anymore—they’re a genuine, aggressive bearish bet.

Data tells a story, but you need to understand what it’s really saying.