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Hedge Funds Turn To Shorting Stables, Bitcoin Drops $20K

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VOC, Voice of Crypto, Bitcoin, BTC

Hedge funds are aggressively placing short bets on the USDT (tether). This comes in the light of the high anticipation of USDT losing its USD backing. Also, USDT is not ridden with systemic risks within the crypto ecosystem. Hence, such factors have induced the hedge funds to form short-bets against stables.

Current on-chain activity is showing signs of increasing bearish sentiment. USDC reserves are increasing. But the inflows aren’t on the increase — it’s the selling activity. This includes the majority of the short-term holders with a 6-12 months holding period.

Hedge Funds go Bearish

Reportedly, the short positions have increased from May’s implosion of Terra’s UST. Hundreds of millions of dollars are at stake forming the short bets. Those funds include Fir Tree Partners and Viceroy Research. These funds have also betted against tether in the past. They cited that issuing companies lack transparency on audited reports.

Trends tell that traders and investors are more inclined toward keeping USDC reserves. Or some are preferring cashing out in USD against USDT as a more safer and liquidated alternate.

Considering the bets, they are occurring on futures markets on Defi applications. Supporting Tether, its CTO took to Twitter to express that the goal is to drive a hole into liquid Tether. He also commented on the shorters causing tons of outflows to buy back the stable at lower prices.

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FTX offers USDT derivatives to provide a platform to bet against. It clocked $65 million in the past 24 hours in trading volumes and $65 million in the past 24 hours with $400 million in open interest volumes.

Bitcoin showing weakness

Bitcoin has been clinging to the perch of $20,000 for more than ten days as of now. Global uncertainty and market weakness are the makings this support too significant. As it goes, the number of times a support level gets broken or kept, the stronger the level becomes.

On a monthly timeframe, Bitcoin is taking support at the lower band of the Bollinger band technical analysis.

Even though $20k is a level where bitcoin likes to hover around, but on the upper hit, $23,350 is a must to break. On the lower end, $17,755 is the nearest support for the target below.

The relative strength index is currently under 30, reflecting market-wide weakness. Considering sentiment analysis, the Bitcoin fear and greed index is touching 11.

 

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Ether, the second-largest cryptocurrency, is changing hands at $1016. It got resisted at a 20-day moving average of around $1245. Additionally, a trendline connection in September of 2021 is supporting Ethereum at $900.

Jatin Sewani is crypto markets writer/reporter based in India. He is skilled in onchain as well as technical analysis. He's currently pursuing actuarial science which lets him look at things from a risk-based perspective.

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