The cryptocurrency market has been facing some turbulence lately, and the latest report from ETC Group reveals an interesting trend – crypto hedge funds have significantly reduced their bitcoin exposure. According to the data, these funds have lowered their bitcoin market exposure to levels not seen since October 2020.
Crypto Hedge Funds’ Bitcoin Exposure Drops
“Crypto hedge funds have really thrown in the towel on bitcoin lately. They have reduced their bitcoin market exposure to only 0.37 over the past 20 trading days, the lowest level since October 2020,” said ETC Group Head of Research, André Dragosch.
This drop in exposure coincides with a continuation in crypto exchange-traded product (ETP) net outflows, indicating that hedge funds are becoming more cautious about their bitcoin positions.
BOOM: Crypto hedge funds have really thrown in the towel on #Bitcoin lately.
They have reduced their $BTC market exposure to only 0.37 over the past 20 trading days. 👀
Lowest since October 2020. pic.twitter.com/WZCRK9QlMG
— André Dragosch | Bitcoin & Macro ⚡ (@Andre_Dragosch) June 19, 2024
Factors Behind the Reduced Exposure
Dragosch explained that it is difficult to pinpoint the exact reasons behind this drop in exposure, as the crypto hedge fund industry consists of directional and market-neutral strategies. However, he noted that the aggregate net long exposure by these funds relative to Bitcoin as a benchmark has significantly declined.
Potential Implications
Dragosch suggested that this reduced exposure could have important implications for the upcoming market upswing. He noted that hedge fund positioning is typically highly pro-cyclical, meaning they have poor market timing in aggregate. As a result, when the market starts to rally once more, these hedge funds might be forced back into the market, providing crucial “dry powder” for the upcoming upward leg.
Cryptocurrency Market Movements
Despite the drop in hedge fund exposure, the overall cryptocurrency market has experienced a slight gain in the past 24 hours. Bitcoin, the leading cryptocurrency, decreased by around 0.2% and was trading at $65,256 at the time of writing. The entire cryptocurrency market capitalization has increased by 0.5% to $2.5 trillion.
Conclusion
The report from ETC Group highlights an interesting shift in the crypto hedge fund landscape, with these funds significantly reducing their bitcoin exposure to levels not seen since October 2020. While the exact reasons behind this move are not entirely clear, it could have important implications for the future direction of the cryptocurrency market.
