Bitcoin
Hedge Funds Betting Heavily on Bitcoin Falling: Will This Strategy Fail?
Is $100K Bitcoin Inevitable?
Looking at the formation on the daily chart, there is no relief for Bitcoin in spot rates. Following the June 6 flash crash, prices reversed sharply from the $72,000 level, further highlighting the importance of the liquidation level.
In the past, Bitcoin prices have pulled back from this level, with analysts expecting a short squeeze when this line is breached.
Hedge Funds Are Shorting Bitcoin Futures: Will It Backfire?
In the midst of this slip-up, an X analyst grades that hedge funds and Wall Street firms have increasingly taken short positions in Bitcoin futures contracts, expecting BTC prices to plummet.
Although they may be net long on the spot market, taking advantage of the rate differential, the trader notes that this strategy is risky. In fact, massive losses could occur if prices rise unexpectedly.
Between the current price and just above the all-time highs of $74,000, exchange data and trader notes show $12 billion in short positions in BTC futures.
This move means that hedge funds are down, and since everyone knows that the Wall Street bigs are selling short, this move could backfire spectacularly.
Still, hedge funds selling BTC futures is nothing new. Often, hedge funds tend to short the futures of a certain product and simultaneously buy in the spot markets, taking advantage of the carry trade to make a profit.
The problem is that this hedging tactic is popular in traditional finance and has been profitable before. On the other hand, Bitcoin is a new asset class that is outside the traditional financial system.
Consequently, the strategy may not work exactly as expected, leading to massive losses.
BTC fragile, but ETF issuers spot on buying spree
It remains to be seen whether Bitcoin will recover from spot rates. As it stands, BTC is under immense selling pressure, falling from $72,000.
Although the upward trend continues, buyers have not yet reversed the June 6 losses, meaning the path of least resistance in the short term is south. A break below $66,000 would completely wipe out the May 20 gains, signaling a change in trend.
Still, buyers are optimistic about what’s to come. Last week, despite the contraction, all Bitcoin exchange-traded fund (ETF) issuers in the United States were on a buying spree.
According to HODL15 Capital, in the first week of June, they added 25,729 Bitcoins. This stock is equivalent to approximately two months of mined coins and is the highest weekly purchasing activity since mid-March. Then, BTC reached all-time highs of around $73,800.
DALLE Featured Image, Chart from TradingView