CME Hedge Funds Go Net Long on Bitcoin Futures
Hedge funds on the Chicago Mercantile Exchange (CME) have made a rare shift in their positioning on Bitcoin futures. According to Ki Young Ju, CEO of CryptoQuant, these leveraged funds are now net long CME Bitcoin futures, a departure from their historical short positions.
This change is significant because hedge funds have traditionally remained net short CME Bitcoin futures due to the basis trade. In this market-neutral strategy, traders buy spot Bitcoin or exchange-traded funds (ETFs) while simultaneously selling futures. The profit comes from the premium between futures and spot prices narrowing, rather than from Bitcoin's price increasing.
However, with the annualized three-month Bitcoin futures basis falling to approximately 3%, below the roughly 3.8% yield available on two-year U.S. Treasury notes, traders have less incentive to maintain basis positions. The returns are lower, and there are additional funding, margin, and execution risks.
The shift in positioning is also notable because it supports the recovery narrative for Bitcoin. After bottoming around $58,000 on July 1, Bitcoin has now traded above $65,000.