Hedge Funds Net Short on Bitcoin and Ethereum
New data from Kaiko Analytics reveals that hedge funds are currently net short on Bitcoin (BTC) and Ethereum (ETH) on the Chicago Mercantile Exchange (CME). This means that there are more short positions than long positions on these cryptocurrencies.
Short Positions Do Not Indicate Bearish Sentiment
Contrary to what one might assume, these net short positions do not necessarily imply bearish sentiment towards Bitcoin and Ethereum. Hedge funds are likely engaging in basis trades, which is an arbitrage strategy that takes advantage of price differences between spot and futures markets.
The “Long Basis” Strategy
Kaiko Analytics explains that hedge funds are probably employing a strategy known as “long basis.” This involves selling futures short while holding spot BTC or ETH. The purpose of this tactic is to protect against price volatility and ensure a specific sale price.
This strategy is particularly effective during contango, which refers to a situation where futures prices are higher than spot prices. By selling futures and holding spot positions, hedge funds can align spot and futures prices as the expiration date approaches.
Plausible Reason for Short Positions
While specific data may not confirm this motive, the most plausible reason for the significant short positions on Bitcoin and Ethereum is the implementation of the “long basis” strategy. Hedge funds are likely using this strategy to take advantage of the contango market condition.
Current Prices of Bitcoin and Ethereum
At the time of the report, Bitcoin is trading at $69,251, while Ethereum is priced at $3,750.
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