ETC Group says crypto hedge funds’ bitcoin exposure has recently dropped

Quick Take

Crypto hedge funds’ bitcoin market exposure has dropped to levels not seen since October 2020, according to an analyst report from ETC Group.

Crypto hedge funds' bitcoin market exposure has dropped to levels not seen since October 2020, according to ETC Group data.

"Crypto hedge funds have really thrown in the towel on bitcoin lately. They have reduced their bitcoin market exposure to only 0.37 over the past 20 trading days, the lowest level since October 2020," ETC Group Head of Research André Dragosch said.

Crypto hedge fund exposure has dropped to levels not seen since October 2020. Image: ETC Group.

Dragosch said that it is difficult to ascertain the major factors behind this drop in exposure, as the crypto hedge fund industry consists of many different strategies that could be both directional and market-neutral.

"But, what we can say is that the aggregate net long exposure by these crypto hedge funds relative to bitcoin as a benchmark has significantly declined," he told The Block.

Hedge fund reduced exposure coincides with ETP outflows

Dragosch added that hedge funds' reduced bitcoin exposure has coincided with a continuation in crypto exchange-traded product net outflows.

"Hedge fund positioning is typically highly pro-cyclical, meaning they have poor market timing in aggregate. When we begin to rally once more, they might be forced back into the market, which is important dry powder for the upcoming upward leg," he said.

Bitcoin decreased by around 0.2% in the past day and was changing hands for $65,256 at 6:11 a.m. ET., according to The Block's Bitcoin price page. The entire cryptocurrency market capitalization has experienced a slight gain in the past 24 hours, increasing in value by 0.5% to now stand at $2.5 trillion, according to Coingecko data.

Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.