2024-04-07 14:49:20
Investing.com – The latest reports from the Commodity Futures Trading Commission (CFTC) reveal that hedge funds and commodity trading advisors are betting more on the price falling, based on the crypto futures market.
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This trend is in line with ‘basis trade’, an arbitration tactic that takes advantage of price differences between bitcoin and its futures contracts, a strategy widely used by speculators during the year.
At the end of the first quarter, bets against the rise in the price of bitcoin reached a level never seen before, with speculators increasing their short positions in standard futures contracts on the Chicago Mercantile Exchange (CME) to 16,102, the largest number since these contracts began to be negotiated at the end of 2017. Each contract represents 5 .
Selling futures positions is a strategy that involves selling a contract with the expectation that the price of bitcoin will fall, something often used by carry traders and arbitrageurs to benefit from the price difference between the spot and futures markets.
The record volume of price drop bets could signal growing interest from hedge funds in carry trade opportunities, even with the recent decline in bitcoin’s value since its peak.
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Bitcoin’s momentum cooled after reaching more than $73,500 in March, but even so, CME futures continued to hold a three-month annualized premium of more than 10%. This premium is quite attractive when compared to yields on more traditional financial instruments, such as US Treasury bonds, which at that time yielded 4.36%.
Some hedge funds may be positioning for a decline in response to recent U.S. economic indicators and the Federal Reserve’s cautious statements about interest rate cuts.
There is also speculation about the behavior of bitcoin after the upcoming halving of mining rewards. Although historical trends indicate price increases following halvings, the arrival of spot exchange-traded funds (ETFs) in the US and the large volume of capital they attract could change bitcoin’s market dynamics. Experts recommend caution when relying on past trends, considering these significant changes and the limited historical data from previous cycles.
The introduction of spot ETFs is already impacting the bitcoin market, and this could influence the cryptocurrency’s performance after the halving in a different way than in previous cycles.
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