Asset managers increase their short bets against bitcoin futures

Asset managers reduced their net-long exposure to bitcoin futures to a 14-month low last week, according to data from the weekly COT report (commitment of traders).

• It was also the fourth consecutive week that they trimmed their gross-long exposure
• The third week out of four that short bets against bitcoin increased
• Gross-shorts are now at an 11-week high while gross-longs sit at a 20-week low

This begs the question as to whether asset managers are ahead of the curve, and we’re about to witness a deeper pullback on bitcoin prices. Were this on any other market I would assume so. But asset managers seem to be taking a more cautious approach with bitcoin in recent months, having effectively halved their overall exposure to the digital currency futures market in Q3.

Sure, bitcoin could certainly move lower if we’re hit with another wave of risk-off. But I’m not willing to bet that will happen simply because asset managers have once again lightened their load. If anything, they may find themselves chasing the move higher again if prices eventually break to new highs later this year.

Bitcoin futures (BTC) technical analysis

Bitcoin has failed to extend its rally any meaningful amount having finally met the $100k milestone. One could say it is in a sideway range amid an uptrend (and therefore assumes a bullish breakout). But we could also point to the double top around $110k, and rising bearish selling pressure on the cumulative volume delate (CVM) for the month, which puts us on guard for a break lower.

How prices react around $90k is likely key to how it will perform over the near-term. Should prices once again rally from this key level, bulls could target the $100k handle and highs around $110 – a break above which assumes the rally will continue.

Whereas a break or daily close beneath $90k could see bitcoin futures perform a deeper correction, with bears potentially eyeing a move to the $80,550 area near the 2021 and March high. At which point, we could reassess its potential to form a swing low and return to its dominant uptrend.

Also take note that the weekly bull-flag target around $124.8k remain in play.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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