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Bitcoin's drop below $65,000 was clearly unexpected, and the reasons behind it were quite shady and determining what exactly caused it is complicated. However, we might have an answer.
Recently, cryptocurrency hedge funds have completely given up on Bitcoin. Throughout the previous 20 trading days, they have decreased their exposure to the BTC market to just 0.37. This is the lowest level since October 2020. The charts show the price trend of Bitcoin from 2019 to 2024, emphasizing notable highs and lows.
Hedge funds' reduced exposure to Bitcoin offers an important reason for the recent steep decline in the cryptocurrency. The lower chart illustrates the rolling one-month beta of global crypto hedge funds to Bitcoin, demonstrating the degree to which hedge fund performance is influenced by changes in the price of Bitcoin.
A hedge fund's performance follows Bitcoin if its beta value is one, whereas a beta of less than one denotes reduced exposure. The drop to a beta of 0.37 indicates that hedge funds are far less vulnerable to changes in the price of Bitcoin than they were a few years ago.
Alex DovbnyaHedge fund exposure was last at this low point in October 2020 just before Bitcoin saw a notable bull run. Hedge funds are well known for their calculated actions and frequently have access to cutting-edge data and industry knowledge. They may have been expecting more drops or volatility based on their withdrawal from Bitcoin.
There are a number of reasons for this cautious approach, such as shifting internal investment strategies, macroeconomic conditions or regulatory uncertainties. Since there has been less exposure, there has probably been more selling pressure on Bitcoin, which has pushed the price below the crucial $65,000 mark.
Given that they frequently have significant capital under their control, hedge funds have a significant influence on the market. The mood of the market and price action greatly affects the flow of funds.
Yuri Molchan
Vladislav Sopov
Dan Burgin
Alex Dovbnya