### Leveraged Funds Increase Short Positions in Bitcoin Futures to Record Levels Amid Market Correction
New York — Bitcoin’s recent price correction following a record high has seen leveraged funds’ bearish bets on Bitcoin futures surge to unprecedented levels.
According to CoinDesk on April 4, the net short positions held by leveraged funds in standard Bitcoin futures contracts on the Chicago Mercantile Exchange (CME) reached 16,102 contracts by the end of Q1. This is the highest since Bitcoin futures trading began in late 2017.
Leveraged funds, described by the Commodity Futures Trading Commission (CFTC) as hedge funds and commodity trading advisors, use short positions as a strategy to profit from anticipated declines in the underlying asset’s price. Traders, especially carry traders and arbitrageurs, often sell futures contracts while simultaneously purchasing the underlying asset to capture the price difference between the spot and futures markets safely.
### Hedge Funds Re-Engage with Carry Trades
Markus Thielen, founder of 10X Research, stated that the increase in Bitcoin futures short positions might indicate renewed interest from hedge funds in carry trades.
“The demand for carry trades among hedge funds is enormous. Despite Bitcoin being down 10% from its all-time high, the futures premium remains in double digits, and hedge funds are capitalizing on this high premium,” Thielen told CoinDesk in an interview.
### Premiums and Returns in a Volatile Market
While Bitcoin’s bullish momentum has currently paused, CME futures continue to trade at an annualized three-month premium exceeding 10%, according to Velo Data. This implies a return for carry traders at least double that of the 10-year U.S. Treasury bonds, which offer a risk-free yield of 4.36% at the time of reporting.
CoinDesk noted that the recent robust U.S. economic data and hawkish comments from Federal Reserve officials have diminished the likelihood of a rapid rate cut in the short term, prompting some hedge funds to overtly wager on Bitcoin price declines.
