Crypto News: Hedge Funds’ Behavior During Bitcoin’s Significant Decline Uncovered
The recent actions taken by crypto hedge funds amidst the downturn in Bitcoin and the broader cryptocurrency market have been revealed.
Data from ETC Group shows that cryptocurrency hedge funds have substantially reduced their exposure to the Bitcoin market to levels not seen since October 2020.
“André Dragosch, Head of Research at ETC Group, stated, “Crypto hedge funds have recently shown a significant decrease in their Bitcoin holdings. Over the past 20 trading days, their positions in the BTC market have dropped to just 0.37, marking the lowest level since October 2020.”
The crypto hedge fund industry is known for its diverse range of strategies, both directional and market neutral, making it challenging to pinpoint the exact reasons behind this reduction in exposure. Dragosch added, “However, it is clear that the total net long exposure of these crypto hedge funds compared to BTC as a benchmark has decreased significantly.”
This decrease in hedge funds’ Bitcoin exposure coincides with their ongoing net outflows from crypto ETFs. Dragosch further noted that hedge fund positions tend to be highly pro-cyclical, suggesting poor overall market timing.
“If a rally ensues, they may need to re-enter the market, potentially fueling the next upside move,” he said. This indicates that the current low exposure could trigger a significant market shift once funds re-enter.
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