Asset Managers’ Bitcoin Exposure Rises, Reversing Recent Trend

Asset managers’ appetite for bitcoin (BTC) appears to have increased over the last week, a sign that larger investors continue to see value in the asset.

The most recent Commitment of Traders (COT) report shows that asset managers increased their open long positions by 975 contracts as of March 21. This marks a reversal from the prior three weeks, where asset managers reduced their longs by a total of 1,482 contracts.

COT data is released weekly by the Commodity Futures Trading Commission (CFTC) and details the positions and open interest of traders of bitcoin futures contracts into “Dealer/Intermediary,” “Asset Manager/Institutional” and “Leveraged Funds” categories.

Asset managers now comprise 49.1% of open long positions on the Chicago Mercantile Exchange (CME), up from 44% the week prior. The increased bitcoin exposure has come after prices for the asset increased 15% from March 14-21, and indicates positive sentiment among institutional investors, although the CFTC's lawsuit on Monday against exchange giant Binance could change their perspective.

Still, asset managers with reportable positions are now 96.60% long bitcoin. This figure has risen to as high as 99% in prior COT reports.

It will be important to view subsequent reports to determine if the increased bullishness continues, or if asset managers reduce exposure.

Traders are likely to continue monitoring BTC reaction following the filing of the CFTC lawsuit against Binance and its CEO, Changpeng Zhao.

The suit alleges that the defendants knowingly disregarded provisions of the Commodity Exchange Act while engaging in a calculated strategy of regulatory arbitrage to their commercial benefit. Binance is the world’s largest cryptocurrency exchange by volume.

The price of BTC fell as low as $26,670 following the announcement, before recovering a portion of the loss in the subsequent trading hour. Hourly trading volume spiked to more than 390% of its average as the asset immediately sold off.

Bitcoin as an asset is a separate entity from Binance as an exchange, but the CFTC’s announcement may have stoked liquidity concerns among current BTC holders, particularly if they trade via Binance.

While the CFTC action may be troublesome for Binance, larger investors may view bitcoin's decline as an opportunity to acquire the asset at a discount.