Recent data from the CFTC indicates that most asset managers believe that Bitcoin price is headed north and have thus increased their bets on a possible Bitcoin price increase more than on price fall.
The data shows that the number of Bitcoins on long futures contracts has increased by 35% this week. The amount of Bitcoin held in long futures contracts is now 517. The last time it hit 500 was at the end of 2020.
A longing futures contract is one in which the holder commits to buying Bitcoin at a future date and agreed on price at the expiry of the contract and hoping to profit from it when the price goes up. Going short on a contract is the contrary because the holder borrows the asset to sell it now at a higher price and then pays back when the price goes down, hence making the profit difference.
The data shows the bullish nature of this type of investor despite the price falling to nearly $31,000. Their move may be deemed as different from the other category of investors. For instance, most hedge funds, corporations, and retail traders have currently diversified their portfolios into Ether since February 2021 as the price of Bitcoin has been shaky of late.
Nevertheless, this commitment is expected to be only in the short term since this class of investors shows only opportunistic investment behaviors — it does not commit to always long or short market positions.
It is obvious that asset managers are more worried about the overall value of the assets under management than the future of the asset itself. Hence, for the benefit of their client, they must move swiftly and know when to exactly change their bet positions to profit from immediate changes in prices.
According to a senior data analyst at Forbes Digital Assets, Javier Paz, this is a unique investment trait not displayed by other kinds of investors. The analyst adds that the behavior by the asset managers can also be explained in that they may have received mandates to “gain scale” in Bitcoin before moving to other assets and they know that Bitcoin can be volatile.
Nevertheless, crypto asset management, while not new, is expected to increase in the next few years as a result of increased adoption and investment in crypto. The influx of more cryptocurrencies and tokens as well as the emergence of a large number of corporates that are approving and investing in crypto is expected to propel this growth.