As speculative interest has returned to bitcoin futures markets, so too have short sellers. According to the most recent CFTC Commitment of Trader’s (COT) report, hedge funds may have been getting roasted by BTC/USD’s meteoric rise through $11,000.
Hedge funds are still short bitcoin while individual traders are extremely bullish. | Source: CFTC COT
Hedge Funds Still Bearish Bitcoin Futures Despite Rally
A parabolic ascent is something that tends to attracts aggressive short-sellers, and the COT data for CME bitcoin futures seemingly confirms that reasoning. While individual traders overwhelmingly use the BTC derivatives market to go long, the bulk of large traders are positioned for a drop in bitcoin’s price, according to CFTC data. These traders are predominantly large hedge funds, which is why they control such a large share of the futures market.
Hedge funds are going short on bitcoin. | Source: CFTC and The Wall Street Journal
CME Still One of the Only Ways To Short BTC/USD
There are some clear explanations as to why hedge funds might appear to have so much short exposure to bitcoin. The first is that there aren’t many other ways to short BTC. This would make CME positioning appear more bearish than overall market sentiment. Consolidated Trading Crypto Analyst L. Asher Corson told The Wall Street Journal:
“CME right now is providing a unique ability for the larger players to have massive short positions with very low counterparty risk.”
LedgerX Wins Approval From CFTC
CME won’t have a monopoly on bitcoin futures for long, however, as several institutions are preparing to wade into the fray. LedgerX is in the headlines today, as its BTC derivatives platform won approval from regulators in another sign of goodwill from U.S.