CME data shows that institutions are long on Bitcoin while hedge funds are aggressively selling on BTC.
Institutions are going to Bitcoin purchases at record level, while hedge funds are selling aggressively
According to CME, the amount of long Bitcoin contracts (BTC) held by institutions is at a higher level. However, the most recent CME Trading Contracts report shows that hedge funds have reached a record number of short positions in BTC.
Apparently, there is a large difference in the perception of the short- and medium-term Bitcoin trend between hedge funds and institutions.
Grayscale Investments already controls 2.4% of total Bitcoin supply
CME Bitcoin open net future contracts. Source: Skew
Why are hedge funds selling aggressively, but not institutions?
Hedge funds generally implement varied strategies to generate returns for investors. Hedge funds often use derivatives and employ a higher risk strategy.
ETP volumes of cryptomorphic ETPs drop in September as investors seek safer investments
In contrast, institutional investors who are allocating a percentage of their portfolio to Bitcoin probably have a long-term strategy. This means that they are not concerned about the short to medium-term performance of BTC.
Some analysts say that hedge funds are probably short of Bitcoin to provide liquidity to institutions that want the highest cryptomeda.
As institutional investors increasingly build their long positions, sellers are needed at CME to balance the order book. Mitchell Nicholson, a cryptomoeda analyst, said:
„Many HFs are probably short selling on CME futures with hedge to capture the base or provide liquidity to the institutions they are buying“.
Technically, hedge funds may also be selling Bitcoin after repeated rejections of a key resistance level. Bitcoin has not been able to exit the $11,700 to $12,000 resistance range since August.
For more than two months, Bitcoin has mainly ranged from $10,500 to $11,700, struggling to show a good time.
After BTC’s recovery by $3,600, hedge funds can expect a significant downturn.
A trader’s pseudonym known as „Bluntz“ said that Bitcoin’s current technical structure is similar to that of February. In March, BTC fell to $3,596 in BitMEX in an abrupt capitalization phase.
It is not yet clear whether hedge funds are short on BTC or providing liquidity to CME buyers based on open contracts. Skew said:
„The new CME Commitment Of Trader report has just arrived for BTC Futures: HFs all-time short. Institutions of all times. Who’s wrong? ”
Institutions show great demand
Despite Bitcoin’s growing hedge fund positions, institutional investors continue to accumulate BTC.
On October 17, Barry Silbert, Grayscale’s CEO, said the company achieved the highest historical value of assets under management (AUM) of $6.4 billion. The gray scale figure is key to measuring institutional activity because its products primarily serve institutional investors.
In the US, there is no Bitcoin Exchange-traded fund (ETF) approved by the US Securities and Exchange Commission (SEC). That is why institutions rely on Grayscale’s Bitcoin Trust, which operates more as an Exchange Traded Product (ETP) to gain exposure to Bitcoin.
Large billion dollar conglomerates that have invested in Bitcoin, such as MicroStrategy and Square, have also emphasized their intention to treat BTC as a treasury asset. At least in the short to medium term, these institutions are unlikely to sell their holdings in BTC.