Despite the slight rise in bitcoin, the queen of cryptocurrencies remains fragile in the face of hedge fund arbitrage in the United States.

If bitcoin regains a few points, going back towards $67,000, we feel the trend is still a little fragile. The correction of recent days could also continue, with very big figures behind the scenes on the options market.

Indeed, at the Chicago Options Exchange, the CME, we are at an absolute record for short sales positions on bitcoin contracts. At the end of the first quarter, there were 16,102 positions taken short on CME bitcoin standard contracts, an unprecedented number. A situation which tends to prove that it is the hedge funds, positioned with leverage, which are in action and that there is a fear on the markets of a massive drop in prices.

One reason given is that the Federal Reserve (Fed) appears divided on what to do with rate cuts, which would give the dollar an earnings advantage for some time to come. And will make a real carry trade around uncorrelated assets, of which bitcoin is a part, profitable.

With a return of more than 10%, three-month short positions on bitcoin, given price movements, are much more profitable compared to the 4.3% of the American 10-year rate. And if the bond market remains tense with economic indicators more dynamic than expected, hedge funds that achieve leverage are very well placed to play and amplify the slightest drop in bitcoin. This may create an additional source of pressure for the queen of cryptocurrencies, which has struggled to find a second wind since its last record at $73,750 in mid-March.

Antoine Larigaudrie with Pauline Armandet


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