While hedge funds grow short bets, Bitcoin ETFs grow.

Hedge funds are increasing their short positions in Bitcoin on the Chicago Mercantile Exchange (CME), even as bitcoin exchange-traded funds (ETFs) enjoy a 19-day streak of gains.

According to ZeroHedge, the Commodity Futures Trading Commission (CFTC) Commitment of Traders (COT) report showed a sharp increase and a new record for net shorts by Bitcoin hedge funds.

Are Hedge Funds Holding on to Bitcoin?

Hedge funds increased their net short positions in CME's standard Bitcoin futures contracts, the data showed. These positions reached a record high of 18,175 contracts. These contracts, worth 5 BTC each, are part of a trading strategy where traders sell futures contracts to profit from expected drops in the asset's price.

Read more: Brief Bitcoin: How it works and where you can do it in 2024

Sina G, founder of 21st Capital, which focuses on BTC, suggested that these record short positions may reflect the hedge fund's interest in profit trading strategies. Traders often hold short periods while buying the asset at the same time, aiming to take advantage of the price differential between the spot and futures markets.

“These are more speculative positions and a hedge fund may indicate a carry trade where Bitcoin is elsewhere. But asset managers take the opposite position. These positions are more speculative and long-term,” Sina G said.

Interestingly, these record short positions coincide with a 19-day inflow into Bitcoin ETFs. Over the past three weeks, ETFs have seen more than $2 billion in inflows. However, despite this massive influx, Bitcoin's price failed to reach its March high of $73,835. Instead, it posted a modest 2% gain over the past seven days.

The price performance of this BTC has confused many investors. However, market experts have explained that this trend is due to the fact that major financial institutions are buying Bitcoin ETFs and at the same time selling futures to take advantage of the price difference. This resulted in high ETF inflows with little impact on the spot price of Bitcoin.

Read more: What is a Bitcoin ETF?

However, JAN3 CEO Samson Mou believes that “all bitcoin shorts will eventually be closed, whether voluntarily or involuntarily.”