Bitcoin Bears Cut Short Bets As Price Neared $80,000

Leveraged funds reduced their net short Bitcoin position to 30,611 BTC as of Oct. 13 from 35,903 BTC a week earlier, according to data from the Commodity Futures Trading Commission. Bitcoin fell nearly 3% during the reporting period, from about $85,600 on Oct. 6 to $83,100 on Oct. 13, and briefly traded below $81,000.

Outright short positions declined by 6,437 BTC to 59,458 BTC. Outright long positions fell by 1,145 BTC to 28,847 BTC. Short exposure remained more than twice the size of long exposure, although the larger reduction in shorts narrowed the gap.

Bitcoin came under pressure as Treasury yields approached 5.3% on Oct. 7. Higher oil prices added to inflation concerns and raised expectations that the Federal Reserve could keep interest rates higher for longer. Bitcoin fell below $81,000 on Oct. 8 after trading near $87,000 earlier in the month.

A selloff in South Korean technology stocks added to market volatility on Oct. 13. The decline coincided with about $813 million in cryptocurrency liquidations over 24 hours, including $686.72 million in long positions. Price swings increased the risk of holding leveraged trades.

Leveraged funds increased spread positions, which use offsetting long and short futures contracts with different expiration dates. Such trades seek to profit from price differences between contracts while limiting exposure to Bitcoin’s direction.

Spread positions rose by 2,719 BTC-equivalent per leg to about 8,434 BTC, an increase of nearly 48% during the week. Gross long exposure increased by 1,574 BTC to about 37,281 BTC. Gross short exposure fell by 3,718 BTC to 67,891 BTC.

Combined open interest in standard and micro Bitcoin futures on the Chicago Mercantile Exchange fell by about 3,567 BTC-equivalent, or 3.2%, during the period.

Asset managers held net long exposure of about 18,440 BTC-equivalent. Their net long position increased by roughly 547 BTC, mainly because short holdings fell faster than long holdings.

Bitcoin’s decline continued after the CFTC’s reporting date. On Oct. 14, higher-than-expected U.S. consumer inflation pushed Bitcoin below $83,000. A rise in wholesale inflation the next day sent the cryptocurrency to about $79,730 and contributed to $939 million in cryptocurrency liquidations.

Bitcoin later recovered to about $82,800 on Oct. 19. Buying interest was concentrated near $80,000, with the next major support level around $78,000 if that level failed.

The next CFTC report was scheduled for Oct. 23 and was due to cover positions held on Oct. 20.