Ethereum
Hedge funds net short Bitcoin and Ethereum futures on CME: Kaiko Analytics
New data from market intelligence firm Kaiko Analytics shows that hedge funds are net short of Bitcoin (BTC) and Ethereum (ETH) on the Chicago Mercantile Exchange (CME).
In a new research article, the crypto-analysis platform said that even though hedge funds are net short BTC and ETH on the CME, this does not mean the funds are bearish on the crypto, but rather that they are engaging in basis trading, a type of trading strategy. ‘arbitration.
Net selling means that hedge funds have accumulated more short positions than long positions in crypto derivatives markets.
According to Kaiko Analytics,
“This does not necessarily mean that these funds are bearish on crypto, it is more likely that they are engaging in one of the most popular trades in crypto, the basis trade.
Basis trading is a type of arbitrage strategy that exploits the price difference between two similar assets. In this case between a BTC or ETH spot and futures. Hedge funds are probably “long term” right now. This means that they short sell futures contracts while holding spot BTC or ETH.
This protects against price movements and guarantees a specific selling price in the event of volatility in the underlying asset. Trading on a long basis works best when prices are in a state of contango, meaning that futures prices are higher than spot prices. The two prices will trend toward each other as expiration approaches.
Although we do not have the data to say with certainty that this is the reason hedge funds are net short, it is the most likely explanation for the massive short positions held by these sophisticated traders, who would rarely sell short positions without hedging.
Source: Kaiko Analytics Source: Kaiko Analytics
Bitcoin is trading at $69,251 at the time of writing, while ETH is worth $3,750.
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