New record of Bitcoin shorts by hedge funds

On the Chicago Mercantile Exchange (CME), hedge funds are increasingly betting against bitcoin, even as spot bitcoin exchange-traded funds (ETFs) see a prolonged period of inflows.

According to a report by Zerohedge, the Commodity Futures Trading Commission (CFTC) reported a new record for hedge fund net short positions in Bitcoin .

The data indicated that hedge funds increased their net short positions in CME Bitcoin benchmark futures contracts to a record 18,175 contracts. The value of each of these contracts is 5 BTC. This trading strategy involves selling futures contracts to profit from expected declines in the price of the underlying asset.

The co-founder of bitcoin specialist 21st Capital, Sina Ji, suggested that the record highs likely reflect hedge fund interest in the securities carry strategy. Typically, this strategy involves shorting futures and simultaneously buying the asset to exploit price differences between the spot and futures markets.

“These are speculative positions and could represent a 'carry trade' where a hedge fund holds a long position in Bitcoin elsewhere. Asset managers, however, hold the opposite position. These positions are less speculative and longer-term”, statements Son G.

It did not go unnoticed that these record short positions coincided with a 19-day period of Bitcoin ETF inflows totaling over $2 billion. Despite this inflow, BTC failed to reach its all-time high of $73,835 in March, posting a modest 2.6% gain over the past week.

The relatively weak price performance puzzled investors. Market experts explained that this trend is due to large financial institutions pouring into Bitcoin ETFs and simultaneously selling futures to take advantage of the price gap. Thus, there is a large inflow into ETFs with little impact on the spot price of Bitcoin.

Samson Mou, who is the CEO of JAN3, remains optimistic, claiming that "all BTC short positions will be closed, willy-nilly or not."