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Leveraged Funds Take Record Bearish Positions in Bitcoin Futures
The funds likely boosted short positions to take advantage of attractive "cash and carry" yields.
Updated Sep 14, 2021, 9:46 a.m. Published Aug 24, 2020, 10:49 a.m.
Bearish bets in bitcoin futures from leveraged funds recently rose to record highs on the Chicago Mercantile Exchange (CME) – though that doesn't necessarily imply a fresh sell-off is coming.
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- In the week ended Aug. 18, leveraged funds – hedge funds and various types of money managers that, in effect, borrow money to trade – increased their short positions by 110% to a record high of 14,100 contracts.
- The data comes from a Commitment of Traders (COT) report published by the U.S. Commodity Futures Trading Commission (CFTC) on Friday.
- Institutional investors held 1,400 short contracts last week too, per the COT; a number that has also more than doubled
- “Record shorts [by leveraged funds] were mostly likely a function of attractive cash and carry levels,” according to Skew, a crypto derivatives research firm.
- "Cash and carry" is an arbitrage strategy that seeks to profit from mismatches in pricing between a derivative product and its underlying asset.
- The method involves buying the asset on the spot market and taking a sell position in the futures market when the latter is trading at a significant premium to the spot price.
- Futures prices converge with spot prices on the day of the expiry, giving a risk-free return to a carry trader.
- Bitcoin futures, due to expire on Aug. 28, were trading at a premium of $400 earlier this month, as per TradingView data.
- As the highest premium since April, that may have prompted leveraged funds to make carry trades. Other exchanges like OKEx also witnessed a surge in the futures premium, as discussed last week.
- The premium has declined to sub-$100 levels in the past three trading days (CME futures are closed on Saturday and Sunday), making carry trades relatively unattractive right now.
- Skew, therefore, expects the next CFTC report for the week ended Aug. 25 to show a decline in short positions.
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Spot prices
- Having put in lows below $11,400 over the weekend, bitcoin has rebounded to over $11,790 at press time, according to CoinDesk’s Bitcoin Price Index.
- A series of higher lows (marked with arrows) seen on the daily chart suggest the path of least resistance is to the higher side.
- The low of $11,367 registered on Saturday is the level to beat for the bears.
Also read: Stablecoin Demand May Drop if Traders Abandon Bitcoin ‘Cash and Carry’ Strategy
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Exchange Review - March 2025
CoinDesk Data's monthly Exchange Review captures the key developments within the cryptocurrency exchange market. The report includes analyses that relate to exchange volumes, crypto derivatives trading, market segmentation by fees, fiat trading, and more.
What to know:
Trading activity softened in March as market uncertainty grew amid escalating tariff tensions between the U.S. and global trading partners. Centralized exchanges recorded their lowest combined trading volume since October, declining 6.24% to $6.79tn. This marked the third consecutive monthly decline across both market segments, with spot trading volume falling 14.1% to $1.98tn and derivatives trading slipping 2.56% to $4.81tn.
- Trading Volumes Decline for Third Consecutive Month: Combined spot and derivatives trading volume on centralized exchanges fell by 6.24% to $6.79tn in March 2025, reaching the lowest level since October. Both spot and derivatives markets recorded their third consecutive monthly decline, falling 14.1% and 2.56% to $1.98tn and $4.81tn respectively.
- Institutional Crypto Trading Volume on CME Falls 23.5%: In March, total derivatives trading volume on the CME exchange fell by 23.5% to $175bn, the lowest monthly volume since October 2024. CME's market share among derivatives exchanges dropped from 4.63% to 3.64%, suggesting declining institutional interest amid current macroeconomic conditions.
- Bybit Spot Market Share Slides in March: Spot trading volume on Bybit fell by 52.1% to $81.1bn in March, coinciding with decreased trading activity following the hack of the exchange's cold wallets in February. Bybit's spot market share dropped from 7.35% to 4.10%, its lowest since July 2023.
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