Asset Managers Add to Bitcoin Long Positions Ahead of Price Increase: Crypto Markets Analysis

Institutional Investors have been increasing their holdings in bitcoin, although the moves are unlikely to foreshadow a long-term price increase.

AccessTimeIconOct 25, 2022 at 7:40 p.m. UTC
Updated Oct 25, 2022 at 7:55 p.m. UTC

Glenn C Williams Jr, CMT is a Crypto Markets Analyst with an initial background in traditional finance. His experience includes research and analysis of individual cryptocurrencies, defi protocols, and crypto-based funds. He owns BTC, ETH, UNI, DOT, MATIC, and AVAX

Institutional investor appetite for bitcoin may be rising despite BTC’s persistently flat trading range.

The "Commitment of Traders" report, released each Friday and reflecting data as of the prior Tuesday, shows that asset managers’ open interest in BTC is now 84% long and 16% short.

The latest figures represent a slight increase from the prior week’s report where asset managers were 80% long (expectation of a rise) and 20% short (expectation of a decline). We’ve seen this metric trend moderately higher since Sept. 6, when asset managers were 74% long BTC.

Asset managers’ holdings show how they are using the large amounts of capital at their disposal, and offer a window into market sentiment.

Prior to Tuesday's crypto price surge, little had changed in bitcoin for weeks. Inflation concerns and macroeconomic uncertainties have driven investor behavior and market volatility. Markets will next be eyeing Thursday’s gross domestic product (GDP) report to gauge economic growth and the likely effects of the Federal Reserve’s hawkish monetary policy.

Current expectations are that the economy grew by 2.4% in the third quarter. This figure would suggest the economy is growing but not too robustly. That would mean the U.S. central bank's interest rate hikes are taming inflation without spurring a steep recession.

One item worth monitoring is a potential shifting relationship between the U.S. dollar and the price of BTC. For much of 2022, BTC and the dollar index (DXY) have maintained an inverse relationship, with the DXY moving higher while BTC trades lower.

Recently that relationship, measured by the correlation coefficient, has narrowed from -0.90 in September, to its current level of -0.54. The correlation coefficient measures the relationship between two assets and ranges from 1 to -1. A reading of 1 implies a direct relationship while -1 reflects the opposite.

While a bit early to take a definitive stance, the DXY has declined since Sept. 27, while BTC has seen relatively little movement over the same time frame. Should DXY and BTC revert to a more inverse price relationship, further declines in the DXY could lead to a quick move higher for BTC.

CoinDesk - Unknown

BTC/DXY Daily Chart (TradingView)

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

CoinDesk - Unknown

Glenn C Williams Jr, CMT is a Crypto Markets Analyst with an initial background in traditional finance. His experience includes research and analysis of individual cryptocurrencies, defi protocols, and crypto-based funds. He owns BTC, ETH, UNI, DOT, MATIC, and AVAX

CoinDesk - Unknown

Glenn C Williams Jr, CMT is a Crypto Markets Analyst with an initial background in traditional finance. His experience includes research and analysis of individual cryptocurrencies, defi protocols, and crypto-based funds. He owns BTC, ETH, UNI, DOT, MATIC, and AVAX