Bitcoin Hedge Fund Net Shorts Set New Record High Amid Positive Bitcoin ETF

Key Points:

• The latest CFTC report reveals a sharp increase in Bitcoin hedge fund net shorts, indicating renewed interest in short futures positions.
• Following the release of the May non-farm payroll report, Bitcoin and the broader crypto market experienced a setback as hopes of reaching all-time highs were dashed.

In the latest weekly Commodity Futures Trading Commission (CFTC) report, a significant surge in record Bitcoin hedge fund net shorts has been highlighted.

Bitcoin Hedge Fund Net Shorts Surge

While part of this increase may be attributed to basis trading concerning Bitcoin exchange-traded funds (ETFs), the potential for an unexpected catalyst looms, capable of igniting substantial short covering.

Short futures positions, a favored strategy among traders, involve selling futures contracts to profit from or mitigate anticipated declines in the price of the underlying asset. The approach often attracts carry traders or arbitrageurs who short futures while simultaneously purchasing the asset to capitalize on the price differential between spot and futures markets.

The notable accumulation of Bitcoin hedge fund net shorts likely signifies hedge funds’ renewed interest in the carry trade.

NFP Report Dampens Crypto Enthusiasm

Despite some recovery in crypto markets from the week’s losses, Bitcoin and the broader crypto market experienced a setback on Friday following the release of the May non-farm payroll (NFP) report. The report surpassed analysts’ expectations, revealing 272,000 new jobs. This outcome tempered expectations of the Federal Reserve scaling back interest rates, bolstering the dollar’s value and dampening hopes of Bitcoin reaching an all-time high before the weekend.

Bitcoin initially flirted with a new all-time high, briefly surpassing the $72,000 mark early on Friday. However, the robust NFP report, released during the early hours of the US session, prompted Bitcoin to shed nearly 4% of its value.

The decline extended to the meme coin category, particularly after GameStop reported disappointing earnings and Keith Gill‘s—also known as Roaring Kitty—first YouTube livestream in years failed to captivate investors. Dogecoin and Shiba Inu registered losses of 7.6% and 4.4%, respectively, while Pepe, dogwifhat, and Bonk witnessed double-digit declines.