As a seasoned crypto investor with a few years under my belt, I’ve seen my fair share of market volatility and price swings. The recent developments in Bitcoin’s price action have left me feeling both apprehensive and intrigued.
In recent days, Bitcoin‘s price action has been uneventful for holders and traders. Following the excitement on May 20th, the cryptocurrency has been producing disappointing new lows, retreating from its impressive peak at $71,900 to under $68,000 at present. Bitcoin has experienced a 7% decline since reaching this week’s highest point, prompting hedge funds to start liquidating their positions.
Hedge Funds Are Shorting Bitcoin Futures On CME: Are They Really Bearish?
Based on data from the Commodity Futures Trading Commission (CFTC) obtained by Kaiko, a blockchain analytics firm, hedge funds currently hold a net short position in bitcoin futures contracts listed on the Chicago Mercantile Exchange (CME).
The recent lack of follow-through by bulls after this week’s price increase may indicate that larger market players believe the upward trend has ended, supporting the gains made in May 2021.
As a researcher studying price action, I observe that the uptrend persists; however, bears may attempt to reverse all gains as early as this week. To counteract their efforts, buyers need to make a significant move. They should ideally push prices above $68,000 initially and then aim for $70,000. On the daily chart, if buyers manage to break through the resistance at $72,000, they will have a better chance of overpowering bears and reaching new all-time highs around $74,000.
As an analyst, I’ve noticed an intriguing discrepancy between the U.S. Commodity Futures Trading Commission (CFTC) report showing net short positions for hedge funds in Bitcoin futures on the Chicago Mercantile Exchange (CME), and Kaiko’s interpretation of this data. Kaiko posits that these positions might not necessarily reflect a bearish outlook on Bitcoin prices. Instead, they could be indicative of “basis trades” engaged by institutional investors. In essence, these investors exploit price discrepancies between the spot and futures markets, capitalizing on arbitrage opportunities.
realizing gains from the price difference between futures and spot markets, as well as securing a safety net against Bitcoin’s volatile prices.
BTC Bulls Dominate The Options Market
Despite the approaching month-end, Kaiko’s analysis indicates robust optimism based on Bitcoin options data. Notably, a significant portion of the options volume is associated with contracts maturing on May 31 and June 28. The majority of these call options imply that traders anticipate price growth before expiration.
Based on Kaiko’s observation, the priciest Bitcoin options contracts set to expire on May 31 have a strike price of $80,000 and a notional value close to $910 million. Consequently, many traders anticipated that Bitcoin would exceed $80,000 by month-end.
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2024-05-25 03:11