Hedge Funds’ Actions During Bitcoin’s Dramatic Decline Exposed
The actions taken by cryptocurrency hedge funds during the recent fall in Bitcoin and the overall cryptocurrency market have been revealed.
According to data from ETC Group, crypto hedge funds have significantly reduced their risks in the Bitcoin market to levels not seen since October 2020.
“Crypto hedge funds have recently given up on Bitcoin. In the past 20 trading days, they have decreased their holdings in the BTC market to only 0.37, which is the lowest level since October 2020,” said André Dragosch, Head of Research at ETC Group.
The crypto hedge fund industry is diverse, with a range of strategies that can be both directional and market neutral. As a result, it is challenging to determine the main factors behind this decline in exposure. However, Dragosch added, “What we can say is that the total net long exposure of these crypto hedge funds relative to BTC as a benchmark has significantly decreased.”
This reduction in hedge funds’ Bitcoin exposure coincided with their ongoing net outflows from crypto ETFs. Dragosch also noted that hedge fund positions are typically highly pro-cyclical, suggesting that they generally have poor market timing overall.
“Once we start rallying again, they may have to re-enter the market, which will be crucial for the upcoming upside movement,” he said. This suggests that the current low exposure could lead to a significant market shift when funds return.
*This is not investment advice.
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