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CME Leveraged Funds Double Down on Shorts as Bitcoin Maintains $19,000

Short open interest for leveraged funds grows on CME as likely hedge trades continue to increase.

Dec 5, 2020 at 4:22 p.m. UTC
Updated Sep 14, 2021 at 10:38 a.m. UTC

Fresh off of bitcoin’s record high in late November, leverage funds trading bitcoin futures on the Chicago Mercantile Exchange continue adding to their short positions as the leading cryptocurrency trades above $19,000.

  • Net short open interest (OI) for CME leveraged funds, or the total amount of outstanding contracts, hit record levels for the past two weeks, according to CME Commitment of Traders reports published every Friday.
  • The market’s total OI hit record highs of $1.3 billion at the end of last month.
  • Despite a slight decrease in short positions in early November, this demographic of traders has continued increasing its short positions since September. Over the same time period, bitcoin has gained 60%.
  • Leveraged funds represent 62% of the total OI on CME’s bitcoin futures market.
  • CME traders likely opened some of these shorts are part of a carry trade in conjunction with long exposure in other bitcoin markets.
  • Also, the trades could be taken as hedges to reduce risk incurred by other open positions in the event of adverse price movements, explained Josh Olszewicz, bitcoin trader at Techemy Capital. Of course it’s hard to know for sure, but using CME bitcoin futures market to open hedging trades as well as exploiting the yield between CME markets and bitcoin spot price is a common strategy for many cryptocurrency trading firms. 
  • Notably, OI for the other categories of CME traders is not nearly as bearish. For example, net OI for the catch-all category of “Other Reportable” traders, claiming 17% of total OI, is heavily long and near all-time highs.

CME bitcoin futures open interest for leveraged funds

Update (Dec. 5, 17:38 UTC): This article has been updated to reflect the carry trade possibility for short OI increase in addition to hedging strategies.

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