BTC Short Funds See Major Outflows, May Mean Negative Sentiment Close to Peak

Investors redeemed a net amount of $5.8 million (roughly Rs. 45 crore) from short Bitcoin funds in the last seven days through June 17. As per a CoinShares report, this behaviour indicates that the negative sentiment clouding the crypto industry at this point, is close to its peak. Short Bitcoin funds are a type of an investment strategy that speculates on an asset falling in value. Presently, with BTC barely maintaining a price point of $20,000 (roughly Rs. 15 lakh), investors seem to have lost the appetite to bet on BTC’s upcoming price fluctuations, whether high or low.

Capital outflows amounting to $39 million (roughly Rs. 305 crore) were pulled out last week. In addition, the value of ‘assets under management (AUM)’ also declined to its lowest since February last year, to $36.3 billion (roughly Rs. 2,84,007 crore), a report by CoinShares said citing findings by CoinShares.

AUM is the total market value of the investments that a person or entity manages on behalf of clients. In the calculation of AUM, financial institutions are known to count crypto holdings, bank deposits, mutual funds, and cash in their possession.

Some crypto players are taking advantage of BTC’s slump to offer investors opportunities to bet on Bitcoin’s dip and churn profits.

This week, ProShares, an issuer of exchange-traded funds (ETFs), said it will launch the first US short Bitcoin-linked ETF on 21 June. This will enable investors to make profit from a decline in Bitcoin’s price, or to hedge their exposure to crypto.

Bitcoin’s price dropped below $20,000 (roughly Rs. 15.6 lakh) for the first time since 20 December 2021 on 18 June, falling as low as $17,800 (roughly Rs. 13.9 lakh) the following day. At the time of publishing, the world’s largest cryptocurrency has recovered to a price of $21,102 (roughly Rs. 16.5 lakh).

These rough times also highlighted the tendency of investors that compel them to ‘buy-the-dip’. Amid the current market drop, Bitcoin funds saw inflows touching $28 million (roughly Rs. 219 crore) in recent weeks.

The market cap of the crypto sector that stood at over $2 trillion (roughly Rs. 15,610,304 crore) around March this year, currently stands at $904 billion (roughly Rs. 90,483 crore), as per CoinMarketCap.

The slump has also axed capital inflows to other crypto assets alongside Bitcoin.

Ether-focussed funds, for instance, lost around $70 million (roughly Rs. 547 crore) last week, Coindesk noted.

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