Rare CME Reversal: Hedge Funds Position for a Bitcoin Surge

Hedge Funds Move Net Long on Bitcoin as Futures Carry Trade Weakens

Bitcoin hedge funds trading on the Chicago Mercantile Exchange have moved into net-long territory, marking a rare change from their longstanding short bias, according to CryptoQuant CEO Ki Young Ju.

The shift suggests institutional traders may be developing a more bullish view of Bitcoin after years of using futures mainly for market-neutral strategies.

Hedge funds have traditionally maintained net-short CME Bitcoin futures positions because of the basis trade. In that strategy, traders buy Bitcoin in the spot market or through ETFs while selling futures contracts at the same time. The goal is to capture the premium between the two markets as it narrows, rather than profit from a direct move in Bitcoin’s price.

That approach has historically kept leveraged funds’ futures positioning negative. However, declining futures premiums have made the strategy increasingly difficult to justify.

The annualized three-month Bitcoin futures basis has dropped to around 3%, below the roughly 3.8% return available from two-year U.S. Treasury notes. Once financing expenses, collateral requirements and trading risks are included, the smaller spread makes the carry trade considerably less attractive.

Bitcoin, meanwhile, has recovered above $65,000 after dropping to around $58,000 on July 1. The move toward net-long futures exposure comes alongside that recovery and may indicate improving institutional sentiment.

Not all of the shift necessarily represents fresh bullish bets. Some hedge funds may simply be closing the short futures positions they previously held as part of basis trades.

Even so, the fact that leveraged funds now hold more long than short CME contracts represents a meaningful change in positioning. If the trend continues, it could signal that professional traders are increasingly willing to bet directly on further Bitcoin gains.