Are institutions predicting a rebound for the crypto market? The latest report from CoinShares reveals that short products on Bitcoin (BTC) dedicated to professional investors have outflowed $27 million, or about 15% of the current exposure on these products.
Institutionals close their shorts on Bitcoin
Monitoring the positions of institutional players is an excellent indicator of the state of the cryptocurrency market. In its latest weekly report dated December 5, 2022, CoinShares reveals to us that these professional investors massively close their short positions on Bitcoin (BTC).
Over the past week, the mass of short products – allowing to bet on the downside – on bitcoin aimed at institutional decreased by $27 million. It would be almost 15% of the outstanding amount on these productsaccording to data from major issuers such as GrayScale or CoinShares.
To help us interpret this data, we interviewed François Laviale, managing director at Alphacap Digital AM. According to him, an outflow of institutional sell positions “is of course an element to be taken into account” :
“The crypto market is a flow market. Taking collection/decollection into account is therefore an essential indicator. In a nascent market, small flows can move the market significantly. »
As for the interpretation, François Laviale explains to us that the data put forward in the CoinShares report “ show a lack of breath on the part of the sellers » :
“These institutional investors believe that the market has already priced the future cascading bankruptcies of several other crypto players. Indeed, the fall of FTX impacted the market by -25%, where that of BlockFi only impacted it by -3%. »
Additionally, long-term Bitcoin investment products saw inflows of over $11 million last week. These two data could be a sign an improvement in the sentiment of institutional investors around cryptocurrencies, after the recent FTX debacle.
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Is this a sign of a rebound to come?
So is this really the case? Can we conclude that professional investors consider that bitcoin bottomed out and that the market should soon rise again? According to François Laviale, we must remain cautious and attentive to “detecting a trend reversal” :
“If the amount of outflows is significant relative to outstandings, the analysis must be qualified because these volumes remain very low compared to the volumes of short options available at certain exchanges. »
In addition, professional investors have not yet re-exposed themselves to Bitcoin. Long-type investment products – betting on the rise in the short term – recorded just $3.3 million in admissions last week. In other words, the feeling is rather one of patience while waiting for the storm to move away.
“Institutional players are generally more rational than retail investors and it is normal to see profit taking at such low levels. »
Finally, François Laviale concludes by recalling “that it is always difficult to determine a bottom” and that even if the short products drop out, “we are still very far from the levels of collection on long products that we saw in 2021 and at the start of the year” and that we must therefore keep an eye on these flows.
Other elements obviously come into play, in particular the potential capitulation of the miners. The fall in the price of Bitcoin currently places them in a situation of financial stress which pushes the less resilient to abandon their activities.
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Source: CoinShares
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Lilian Aliaga
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