81 Interactions, 2 Today
Over the last few weeks, the rising price of Bitcoin has gradually increased institutional interest. It is not surprising to see increased participation right now. Especially considering BTC’s value reaching $50,000 before correcting was certain to cause some repercussions.
According to data, the Open Interest on CME Bitcoin Futures has once again surpassed the $2 billion mark. This is intriguing, especially given the market’s continued sideways consolidation.
$2 billion v. $3 billion – How much of a difference does it make?
Yesterday, the market OI fell to $1.5 billion as a result of contract expiration, which caused a reshuffling of OI’s worth. However, there isn’t the same level of interest in Bitcoin as there was in the first quarter of 2021. Why? Because institutions remain wary. When the categories are reviewed, the narrative becomes clearer.
According to the CFTC COT report, leveraged or hedge funds have continued to acquire additional short positions since the short squeeze on July 26 (when Bitcoin rose from $35200 to $40550 in 24 hours).
Now, this is something most hedge funds facilitate as they are trying to remain risk-averse in the market. The entire point of hedge funds accumulating short positions is that a market breakout is still being considered by these accredited investors.
In fairness, these might not be direct short bets against Bitcoin, but exposure through CME or any other market to hedge out risks.
Can we consider the Bitcoin dilemma to be a part of institutions?
Dilemma is a strong word, but institutions may simply be positioning themselves to cater and remain net-profitable regardless of a bullish or bearish breakout. Smart Money has not highlighted a change, implying that its contribution has been modest. Asset managers seeking long-term gains, on the other hand, are nett long on BTC Futures.
According to Arcane Research, one possible explanation for short exposure amidst hedge funds is the negative premium of GBTC products. Regardless of price, GBTC premiums have stayed negative in the market. This implies that Grayscale isn’t making any significant market moves either.
As a result, while institutions are returning to Bitcoin, they are taking baby steps in terms of market positioning.