Are institutions predicting a rebound in 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 amount outstanding on these products.
Institutions close their shorts on Bitcoin
Monitoring the position of institutional players is a great 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 close their short positions on Bitcoin (BTC) heavily.
Over the past week, the mass of short products – which allows betting on the downside – on institutional-oriented bitcoin a decrease of $27 million. It would almost be 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, outflow of institutional sales jobs “of course it’s an aspect to consider” :
“The crypto market is a flow market. Taking collection/uncollection into account is therefore an essential indicator. In a new market, small flows can move the market significantly. »
Regarding the interpretation, François Laviale explains to us that the data forwarded in the CoinShares report “ showed a lack of breath on the part of the sellers » :
“These institutional investors believe that the market has already priced in the cascading bankruptcies of several other crypto players. In fact, the fall of FTX affected the market by -25%, where BlockFi’s impact only affected it by -3%. »
In addition, long-term Bitcoin investment products saw an inflow of more than $11 million last week. These two details could be a sign improved institutional investor sentiment around cryptocurrencies, after the recent FTX debacle.
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Is this a sign of a comeback to come?
Is that really the case? Can we conclude that professional investors consider that bitcoin upside down and that the market should rise again soon? According to François Laviale, we must remain vigilant and cautious about it “Detecting a trend reversal” :
“If the amount of outflows is significant compared to outflows, the analysis must be qualified because these amounts are still very low compared to the amounts of short options available at certain exchanges. »
In addition, professional investors they are not yet exposed to Bitcoin again. Ship-type investment products – betting on the rise in the short term – recording only $3.3 million in admissions last week. In other words, the feeling is rather one of patience and waiting for the storm to move away.
“Institutional actors tend to be more rational than retail investors and tend to take profit at such low levels. »
Finally, François Laviale concludes by remembering “it is always difficult to determine the bottom” and even if the short products fall out, “we are still a long way from the pick-up levels on long products that we saw in 2021 and at the start of the year” and we must therefore keep an eye on those flows.
It is clear that other aspects come into play, in particular potential capitalization of the miners. The current fall in the price of Bitcoin puts them in a state of financial stress that forces those who are less resilient to abandon their activities.
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