Hedge Funds Go Long on Bitcoin, But Does It Mean Anything?

Hedge funds have made a rare bullish bet on Bitcoin by turning net long on futures contracts on the Chicago Mercantile Exchange (CME), but two charts suggest that real buyers are not joining in.

According to data from CryptoQuant, the group of leveraged funds, which includes hedge funds, has flipped from being net short to net long for the first time in years. This is significant because most of this trading comes from large professional investors.

The basis trade, a market-neutral strategy that aims to profit regardless of price movements, has been a dominant force in Bitcoin futures trading on the CME. In this trade, funds buy Bitcoin on the spot market and sell an equal amount of futures contracts against those coins, locking in the small gap between the two prices as profit.

However, despite the hedge funds' bullish bet, US institutional demand for Bitcoin remains soft. The Coinbase Premium Index, which measures whether Bitcoin trades higher on Coinbase than on offshore platforms, has stayed below zero since early May, indicating that American buyers are not paying up.