In bitcoin futures traded on the Chicago Mercantile Exchange (CME), hedge funds have abandoned their long-standing short positions and moved into net long positions.
This rare shift suggests that professional investors are increasingly confident that bitcoin prices will rise. Leveraged funds have historically profited by selling futures contracts while buying spot bitcoin or exchange-traded funds (ETFs) using a strategy called “basis trading.”
Changes in Futures Contracts
According to CryptoQuant CEO Ki Young Ju, leveraged funds on the CME have now shifted to net long positions. This change follows years of structurally short positions. This strategy lost its appeal when futures yields fell below US Treasury bond yields. The annual yield on three-month bitcoin futures dropped to approximately 3%, falling below the approximately 3.8% yield on two-year US Treasury bonds.
The Rise in Bitcoin Prices
Bitcoin prices are currently trading above $65,000 after falling as low as $58,000 on July 1st. This price movement, coupled with hedge funds shifting to net long positions, supports the recovery story for bitcoin. Net long positions of leveraged funds on the CME show that gains from futures trading are now exceeding short positions, which is being seen as a potential bullish signal for institutional investors.
This shift indicates a significant change in market participants’ expectations regarding bitcoin’s future price movements. These new positions by hedge funds can be interpreted as a sign of confidence that bitcoin may appreciate further in the long term.
