Hedge funds are overwhelmingly bearish on Bitcoin on CME, but one analytics firm warns that shorting the Bitcoin price now is “a trap”.
UPDATED 1.51PM AEST
Data from the Commodities Futures Trading Commission shows that short positions from hedge funds on the CME Bitcoin Futures have reached all time highs recently.
The shorts from institutional investors on CME climbed above $50 million for the first time in the week of November 12.
Hedge funds comprise about two thirds of the total short positions while the top eight long traders are at all time lows.
Analyst Ryan Todd from The Block said the bearish sentiment from hedge funds was a significant change from the norm.
“This is notable as throughout 2Q19, hedge funds have been relatively net neutral, while asset managers and non-reportable traders skew heavily long (>80%); while other traders have been net short (most likely operating in a dealer/sell-side capacity in making markets?),” he wrote.
Data is a bit stale (Fri, from values printed Tues), but interesting to see the "smart money" trading CME $BTC futures crowd into a short-trade:
-Hedge fund net short open interest (SOI – LOI) is at ATH
-HFs 2/3 of total short OI, close to ATH
-Top 8 long traders per OI at ATL pic.twitter.com/qvbqyHoCye
— Ryan Todd (@_RJTodd) November 19, 2019
Hedge funds shorts are not the whole story
However, The Block’s analysis is far from the whole picture and even Todd admits the data is “a bit stale”.
Veteran trader Peter Brandt said the amounts involved were insignificant when it came to hedge funds.
“Hedge fund short position equals 4,500 BTCs, a drop of water in ocean,” he told Micky via Twitter. “Hedge funds will cover quickly when wrong.”
Crypto brokerage and analytics firm BitOda analysed the figures from the week of the 19th and they paint a much more optimistic picture.
“From this data we are inferring the latest sell-off to be mostly weak longs getting out of the market pushing the price lower NOT new shorts coming in.
“Because of this, we believe the sell-off shouldn’t be as long and as deep as previous bear markets. In general, we are wary of getting short here because we feel it might be a trap.”
Bulls are tipping a $25,000 to $55,000 Bitcoin price next year
Amsterdam based trader Crypto Micheal believes the latest China FUD fueled pull back in the Bitcoin price is a mere blip on the radar as the price heads to $25,000 next year.
“All in all, the long-term trend is still fine, aside from a parabolic explosion earlier this year (which is an outburst to the upside). Keeping the trend intact -> market is fine. Onwards to $20,000-25,000 in 2020.”
All in all, the long-term trend is still fine, aside from a parabolic explosion earlier this year (which is an outburst to the upside).
Keeping the trend intact -> market is fine.
Onwards to $20,000-25,000 in 2020. pic.twitter.com/uednu3jgo4
— Crypto Michaël (@CryptoMichNL) November 23, 2019
And Plan B, the man behind the immensely popular Stock to Flow model that predicts an zillion dollar Bitcoin price (possibly along with world peace and the eradication of all poverty) agrees.
“Some people panicking about this -17% week. It’s just normal #bitcoin behavior. Note we are still up 2x YTD. And yes, S2F model is just fine, nothing out of the ordinary.”
His model tips a $55,000 Bitcoin price following the halving in May 2020.
Blockstream’s Samson Mow also thinks the upcoming halving will fix Bitcoin’s woes.
He says that $16.2 million of new money needs to be invested in Bitcoin every single day at the current inflation rate so halving the inflation rate will be bullish.
Don’t bet the house on Twitter Bitcoin bulls
Hedge fund manager and crypto analyst Mark Dow has long thought Bitcoin is trapped in a bullish echo chamber “bubble” and he doubled down a few days ago.
He believes the bulls voices and the associated FOMO is starting to unwind.
“Truly strong assets don’t give back moves like the one up thru 10k, especially when they start from so far below ATHs,” he tweeted
“Thesis of echo bubble unwind, with occasional upside spasms & progressively weaker FOMO, just got a lot stronger.”
Curiously enough, veteran trader Peter Brandt believes that a purge of the Bitcoin bulls will itself be a bullish signal.
He’s predicting pain in the short term, with the bear market going on for months before bottoming out around $5,500 in July 2020.
But his long term forecast of $50,000 is intact and he suggests the time to buy will be when all the Bitcoin bulls have been “fully purged.”
“When no bulls can be found on Twitter, then we will have a great buy signal”.
He added today: “Not saying BTC cannot rally.”
Tuur, I think a prolonged journey below the line might be needed to thoroughly prepare BTC for the move to $50,000. The bulls must first be fully purged. When no bulls can be found on Twitter, then we will have a great buy signal.
— Peter Brandt (@PeterLBrandt) November 23, 2019