Retail investors and large hedge funds compete on the bitcoin futures market

Analysts at The Wall Street Journal, having monitored the situation on the bitcoin futures market, came to the conclusion that small traders are betting on the growth of the bitcoin, while large ones are openly short-selling.

Let us recall that a futures is a form of exchange contract, a tool with which traders bet on a rise or fall in price. 

According to the US Commodity Futures Trading Commission (CFTC), among the total mass of holders of BTC futures contracts on the CBOE, among whom the majority are small traders, bets on the price falling are 3.6 times less than on the fact that it will rise. Among trading firms, including those managing funds for third-party investors, short positions are opened 2.6 times more than long ones.

But the underlying cost is formed not only depending on the percentage of rates. It is also of great importance how large and small traders relate to the bitcoin phenomenon in principle.

The hype around cryptocurrencies, which started in 2017, when small traders were actively buying bitcoin, largely predetermined its rate, which grew by 1330% over the year.

CFTC data also reflects the mood of some “whales” on Wall Street. Large conservative companies consider Bitcoin to be a bubble and therefore, for the most part, bet on a decline. Reputable banks and investment managers often ignore bitcoin futures.

Stephen Sanders, managing vice president of Interactive Brokers Group - a brokerage that has provided its clients with access to bitcoin futures - noted that "there is probably more optimism in the retail segment than in the institutional segment." BTC futures have given institutional pessimists the opportunity to profit from their conservative beliefs by shorting them.

However, bearish sentiment was more pronounced in late December last year, according to CFTC data. Back then, the ratio of short to long positions was 1 to 4. Today, hedge funds and asset managers have only 40% more short positions than long positions. It is possible that this gives the prospect of a turning point in the situation, although the outcome is far from predetermined.

 After all, a bearish game can also be part of a well-thought-out trading strategy of “spreading”, when a company opens both short and long positions at the same time within the same area. Therefore, opening short positions on the BTC futures market does not always mean that the trader is confident that the rate will drop.. It is possible that the bearish game was started in order to buy up a large volume at a favorable price.

To sum it up, we can say that the trading activity of bitcoin futures is much weaker than the trading volumes of cryptocurrency exchanges in general. Therefore, futures markets have little influence on the exchange rate so far.

One of the factors for such slow growth is that many Wall Street banks are afraid to deal with bitcoin. For example, JPMorgan Chase and Merrill Lynch refused to provide their clients with access to cryptocurrency derivatives.

According to https://www.wsj.com