Amid a recent downturn in the market, with bitcoin dropping to $68,450, the most recent Commitments of Traders (COT) report from the Commodity Futures Trading Commission (CFTC) reveals that hedge funds are making significant bets against bitcoin.
Bitcoin is now facing pessimism from hedge funds, despite the optimism from crypto enthusiasts and analysts as the price approached $72,000. On June 7, when bitcoin fell to $68,450 before slightly recovering to over $69,000, the financial news outlet Zerohedge shared on the social media platform X, highlighting a “big jump and new record high in bitcoin hedge fund net shorts.”
At 7:29 p.m. EST on Friday, Zerohedge referenced the COT report from CFTC. Eight hours earlier, they predicted that the latest weekly COT update would show a substantial increase in bitcoin hedge fund net shorts, which was indeed confirmed in the report.
Zerohedge raised concerns, stating, “When this snaps, it will make Volkswagen/GME look like amateur hour.” An increase in net short positions signifies a significant change in market sentiment, particularly among hedge funds. This surge in shorting activity indicates that hedge funds are increasingly betting on a decline in bitcoin’s value, aiming to profit from falling prices.
The bearish stance taken by institutional players like hedge funds can impact broader market sentiment, potentially leading to increased volatility and downward pressure on bitcoin prices. However, a sudden spike in bitcoin prices can quickly wipe out short positions, as seen when bitcoin dropped below $69,000, resulting in the liquidation of long positions instead.
If bitcoin’s price were to soar, hedge funds with substantial short positions would face significant financial losses. The higher the price goes, the greater the losses for those holding short positions on bitcoin. This situation could trigger a short squeeze, where short sellers are forced to buy back their positions to limit losses, further driving up the price of bitcoin. In the unpredictable world of bitcoin trading, even the most well-thought-out strategies can face unexpected challenges.
What are your thoughts on the growing bearish sentiment from hedge funds towards bitcoin? Share your insights in the comments section below.
