Bitcoin investors remained positive this week, despite data showing that bearish bets on the futures market had increased during the previous week.
Positioning data on CME Bitcoin futures showed that institutional managers held 14% more short positions in the seven days to Friday, June 21, than in the week before, according to the Commodity Futures Trading Commission (CFTC).
Futures trade allows investors to back an asset’s losses as well as gains: short positioning means backing an asset to fall in price over a defined period. The increase in the CFTC short position data on CME Bitcoin futures, therefore, would indicate growing bearishness by the larger institutional players.
Playing it by the Charts
They may have been playing it by the charts. The previous two tops occured in mid-May when the price of Bitcoin reached a high of $8,352 before falling back nearly $1,000, and then at the very end of May reaching $9,066 before falling back to $7,807.
The chart shows that in the week to June 21, when shorts on CME Bitcoin futures grew, Bitcoin pushed up above $10,000, in a chart pattern that might have led many to believe another pullback was imminent.
This drop, predicted by many institutional investors, never came, however, and private investors continued to back the Bitcoin rally. Indeed, the CFTC report showed that smaller investors continued to hold more long positions – backing the continued rally: investors with fewer than 25 Bitcoin futures contracts showed four times as many long positions than shorts.
Short Covering
This may help explain how the rally of the last couple of weeks gained momentum, as those on the institutional side joined the buying to cover their short positions.
Tanya Abrosimova, analyst for FXStreet, said:
Many experts believe that at this stage Bitcoin is driven by FOMO (fear of missing out), while the market repeats the situation of late 2017.
It is also likely that Facebook’s announcement about the lauch of its Libra cryptocurrency caught the institutional shorts on the wrong side of the market. Since the Libra announcement on Tuesday, June 18, Bitcoin has gained more than 30%.
Abrosimova added:
Looking technically, Bitcoin has been growing strongly for eight days in succession, which is the longest period of uninterrupted growth since December 2017. As BTC/USD is trying to take out a new barrier at $12,500. Once it is out of the way, the next bullish target of $13,000 will quickly come into view.
