Bitcoin Net Shorts Hit Record $7.5 Billion Driven by Popular Trade Strategy
Bitcoin futures have witnessed a surge in net short interest, primarily attributed to the growing popularity of a market-neutral strategy known as the basis trade.
Basis trade, which aims to capitalize on discrepancies between spot and futures markets, likely accounts for a significant portion of the short interest in approximately 18,000 CME Bitcoin futures contracts.
“The popularity of the basis trade can be observed through the short interest on CME BTC futures held by hedge funds. There is over $7.5 billion in net-short futures currently,” Ravi Doshi, the head of markets at prime broker FalconX, told Bloomberg.
“In 2021, when BTC basis was significantly higher than it is now, the peak short position was only $2B.”
The basis trade has gained traction in the cryptocurrency space since the launch of spot Bitcoin exchange-traded funds (ETFs) in January.
Traders can now buy these ETFs and sell futures representing Bitcoin at higher prices, profiting from the price differences.
The availability of ETFs has simplified the execution of this trade, as it can be conducted through regulated brokers, streamlining what is known as a cash-and-carry strategy in crypto markets.
Hedge funds are taking record net short positions on Bitcoin.
These are institutional investors that manages billion of dollars and are bearish on $BTC.
They are still buying Spot ETF but are still short.
This is a common position hedge for institutional investors.
It is… pic.twitter.com/sMKN09x6xf
— arndxt (@arndxt_xo) June 8, 2024
The surge in short interest in futures aligns with a resurgence in demand for spot Bitcoin ETFs, which collectively hold over $61 billion in assets.
However, while the basis trade currently enjoys popularity, it should not be misconstrued
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