Hedge Funds Hold Record Bearish Bitcoin Bets, Data Show

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Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.

Most funds may have taken short positions as a part of a"carry trade," one observer said.Hedge funds boosted their net short positions in the Chicago Mercantile Exchange's standard bitcoin futures contracts to 16,102. That's the most since the futures began trading in late 2017,A short futures position is a trading strategy in which a trader sells a futures contract to profit from or hedge against an expected drop in the underlying asset's price.

"There is a massive demand from hedge funds to put on carry trades. Despite bitcoin’s -10% decline from the all-time high, the futures premium has remained in double digits, and hedge funds are taking advantage of these high rates," Thielen told CoinDesk in an interview.While bitcoin's bullish momentum stalled after hitting record highs above $73,500 in March, CME futures continue to trade at an annualized three-month premium of over 10%, according to Velo Data.

The Bitcoin blockchain's fourth mining reward halving, due later this month, reduces the per-block amount of BTC issued as a reward to miners to 3.125 BTC from 6.25 BTC. Historically, bitcoin has chalked out major bull runs 12 to 18 months after halving, when the reduced per-block emission met demand.

"We believe that bitcoin’s market dynamics have fundamentally changed with the advent of U.S. spot BTC ETFs," Duong said in a market update last month."Their multi-billion dollar net inflows in just two months have irrevocably altered the landscape. With major institutional players now capable of taking exposure through these vehicles, bitcoin's response to the upcoming halving may not necessarily mirror its performance in prior cycles.

 

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