Bitcoin rose sharply this week after Tesla TSLA CEO Elon Musk gave the cryptocurrency a tacit confirmation.
Musk spiked the price of Bitcoin when a long-standing battle between bullish retailers, organized through Reddit’s WallStreetBets forum, and Wall Street hedge funds, which have long been short of GameStop stock, culminated – with regulators and brokers who tried to pass hectic markets with severe restrictions.
Now, data has shown that hedge funds are short amounts of bitcoin worth more than $ 1 billion, even as retailers pile into bitcoin and other cryptocurrencies.
Traders on Reddit’s WallStreetBets forum have been raising the price of GameStop stock over the past few weeks. … [+]
STRF / STAR MAX / IPx
Hedge funds have been increasing their bitcoin short positions – effectively betting that the price of an asset will fall – since Bitcoin price began to rise in October, data from crypto news and analytics firm The Block showed.
The net short position in Bitcoin futures is the largest ever, according to the CFTC’s latest report on traders in financial futures.
Bitcoin price has risen around 200% since October, rising to over $ 40,000 per bitcoin before falling slightly. The soaring Bitcoin rally is largely due to institutional investors adjusting to cryptocurrency and payment giants like PayPal PYPL PYPL adding their support – although bubble fears have surfaced.
With hedge funds increasingly betting against the price of Bitcoin and covering their long positions to some extent, retailers who are app-assisted and bored of lockdowns are speculating on Bitcoin and everything else.
“Stuck at home due to pandemic bans and restrictions appears to have sparked an influx of day traders,” Frédérique Carrier, head of investment strategy at RBC Wealth Management, wrote in a note.
“Investor attitudes are shaped by the headlines of some high profile issues. For example, Bitcoin’s 35% gain in the first nine days of 2021 after a five-fold increase in price from March to December 2020, or the more than six-fold increase in GameStop shares in less than two weeks to Jan 26, or even Tesla, now the fifth largest stock in the S&P 500 by market cap, with a market cap greater than that of the major US, European and Japanese automakers combined. “
Hedge funds have been cutting bitcoin increasingly since the price of bitcoin began to rise … [+]
Brokerage eToro recorded another million in the first month of 2021 after adding 5 million users throughout 2020, suggesting that the demand for stock and cryptocurrency trading among causal investors is still growing.
In the meantime, many members of the bitcoin and cryptocurrency community have been quick to promote the idea that retailers disappointed with restrictions should turn to crypto.
“With Robinhood ceasing to trade certain assets like GameStop and Nokia, and Nasdaq President and CEO Adena Friedman demanding regulations to prevent retail investors from coordinating on social media, the argument for cryptocurrencies is growing,” said Nicholas Pelecanos, head of trading at blockchain platform NEM, said in email comments. “I believe we will see a new wave of investors as a result of this debacle, getting over Bitcoin and other major crypto assets.”