Hedge Funds Are Heavily Short on BTC, Will GameStop Overshadow the Saga?
On Friday, Bitcoin experienced a notable decline, falling to $68,450, before making a modest recovery to just above $69,000. This move in Bitcoin price coincided with a significant shift in market sentiment. This change is also reflected in the Commodity and Futures Trading Commission’s (CFTC) latest Commitments to Investors (COT) report.
Hedge Funds Are Heavily Shorting Bitcoin
The report showed that hedge funds were heavily shorting Bitcoin and placing significant bets against the oldest cryptocurrency. Additionally, this increase in short positions reflects the downward trend of institutional investors. This shows that many people expect the Bitcoin price to fall.
Financial news outlet Zerohedge highlighted this trend in X. He noted “a huge jump and new record high in Bitcoin hedge fund net shorts” on Friday. Previously, Zerohedge correctly predicted that the latest COT update would reveal a significant increase in short positions against Bitcoin.
Zerohedge’s comment that “these snapshots will make Volkswagen/GME look like amateur hour” points to the potential for a dramatic market reversal. In the trading world, a large number of short positions can lead to a situation where a sudden price increase forces short sellers to cover their positions through buybacks.
This movement pushes prices even higher; a phenomenon known as short squeeze. The comparison with Volkswagen and GameStop underscores the potential for significant market turmoil. In 2008, Volkswagen briefly became the world’s most valuable company due to a short squeeze that caught many investors off guard.
Similarly, GameStop’s stock price surged in early 2021 as retail investors coordinated a buying spree, leading to massive losses for those holding short positions. Analysts expect the consequences of this hedge fund activity to be higher for Bitcoin than for GameStop or other shorted stocks.
While short positions reflect a pessimistic outlook on Bitcoin’s near-term prospects, the volatile nature of cryptocurrency markets means rapid and unexpected price movements can occur. If the price of Bitcoin rises sharply, those with short positions will suffer significant losses. This would potentially lead to a cascade of buying as they look to cover their shorts.
Also Read: Bitcoin Holders With 964K BTC Near Break-Even Point, Will BTC Price Drop To $67K?
What’s Next for BTC Price?
Hedge funds shorting Bitcoin are expecting a drop of $18,175 at the current BTC price. However, technical indicators and analysts’ opinions point to an increase in both the short and long term. This suggests that Bitcoin could reach a new high soon, and if the prediction comes true, these short positions will be liquidated, leading to an unprecedented rally.
However, Friday’s price action saw Bitcoin briefly fall below $69,000, triggering liquidations on long positions rather than shorts. Still, the market remains on edge, aware that a sudden rise in Bitcoin’s value could trigger a dramatic short squeeze. This would not only push prices even higher, but could mirror and even exceed market dynamics seen in past fiscal periods, such as Volkswagen and GameStop.
At the time of writing, the BTC price fell 0.06% to $69,382.34 on Sunday, June 9. The crypto giant displayed a phenomenal market cap of $1.36 trillion. Additionally, Bitcoin’s 24-hour trading volume decreased by 62.23% to $12.95 billion.
Also Read: Top 10 Cryptos That Outperformed Bitcoin This Year
✓ Share:
parofix consists of an experienced team of local content writers and editors who work around the clock to cover the news globally and present the news as a fact rather than an opinion. parofix writers and reporters contributed to this article.
The content presented may contain the personal opinion of the author and is subject to market conditions. Do your market research before investing in cryptocurrencies. Neither the author nor the publication accepts any liability for your personal financial loss.
#Hedge #Funds #Heavily #Short #BTC #GameStop #Overshadow #Saga
