Hedge Funds Net Short on Bitcoin and Ethereum on CME: Kaiko Analytics Data
Hedge Funds Net Short on Bitcoin and Ethereum on CME, Kaiko Analytics Data Shows
New data from market intelligence firm Kaiko Analytics reveals that hedge funds are currently net short on Bitcoin (BTC) and Ethereum (ETH) on the Chicago Mercantile Exchange (CME). Despite this, the analytics platform emphasizes that this does not necessarily indicate bearish sentiment towards crypto, but rather, a strategic basis trade approach.
In a recent research article, Kaiko Analytics explains that hedge funds have accumulated more short positions than long positions in the crypto derivatives markets. This type of arbitrage strategy, known as the basis trade, involves exploiting price differences between similar assets, such as BTC or ETH spot and futures.
According to Kaiko Analytics, hedge funds are likely ‘long basis’ at the moment, meaning they are selling futures short while holding spot BTC or ETH. This strategy helps protect against price fluctuations and guarantees a specific sale price in case of volatility in the underlying asset. The basis trade is most effective when prices are in a state of contango, where futures prices are higher than spot prices, and the two prices converge as expiration approaches.
While the exact reasons for hedge funds being net short are not definitively known, Kaiko Analytics suggests that the basis trade is the most probable explanation for the significant short positions held by these sophisticated traders.
At the time of writing, Bitcoin is trading at $69,251, while Ethereum is valued at $3,750. Investors are advised to conduct their own due diligence before engaging in high-risk investments in Bitcoin, cryptocurrency, or digital assets.
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Source: Kaiko Analytics
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