Research Weekly – Futures Data Highlights Trader Positioning
This week’s research covers various aspects of the Bitcoin market, including ETF liquidity, the impact of difficulty adjustments on miner economics, asset management company classifications, Bitcoin price, and hash rate decline. The recent launch of spot ETFs has changed the trend of traders reducing long positions, but difficulty adjustments may lead to a decrease in hash rate and affect miner income. The stability of Bitcoin price and the announcement of the Consumer Price Index in April will be of interest to investors. Stocks and bonds have performed well, and gold and oil prices have also risen.
Title: Research Weekly – Futures Data Highlights Trader Positioning
Author: NYDIG Research
Source: NYDIG Research
Translation: Mars Finance, MK
This week’s content is as follows:
Futures reports focus on revealing the positioning of major investors, but media and seller descriptions are often misleading.
Based on ownership data reports, ETF liquidity is likely driven mainly by retail investors. As a result, Grayscale has decided to temporarily suspend daily outflows of funds.
The impact of difficulty adjustments on miner economics is discussed.
The weekly Commitment of Traders (COT) report released by the Chicago Mercantile Exchange provides key insights for market participants and enriches the analytical perspective. However, the industry tends to focus only on net positions while ignoring total long and short positions, and some selling brokerages overlook trader classifications, leading to misunderstandings and biased conclusions for the market and its participants. We recommend that readers refer to the explanatory notes in the COT report and recognize that these reports often lag behind the market by two weeks (for example, the latest data is as of 4/30), which is crucial. This week, we will delve into this report and explore more accurate methods of data analysis.
Due to the slowdown in ETF inflows, traders are reducing long positions.
Traders (sellers in the market, usually banks) tend to take short positions in futures, which is a strategic choice. However, the launch of spot ETFs has slightly changed this dynamic. With funds flowing into spot ETFs, many market makers and authorized participants have started using Bitcoin futures as a hedge tool for short positions. With the increase in funds, traders are shorting ETF shares in the market and buying futures for hedging. Therefore, with the launch of ETFs and the increase in fund inflows, we have witnessed a significant increase in trader long positions (which also explains the asymmetry between long and short positions). Now, with the slowdown and even reversal of fund inflows, we observe a corresponding decrease in long positions.
Asset management companies are positively correlated with Bitcoin price.
The classification of asset management companies mainly consists of futures-based ETFs, which are almost all long positions. Their positions (number of futures contracts) are closely related to the spot market. This is not surprising, as Bitcoin is typically an asset driven by price dynamics. With the recent cooling of Bitcoin price, we have also noticed a slowdown in the growth of futures contracts in the asset management category.
Leveraged funds tell two stories of investors.
Leveraged funds include Commodity Trading Advisors (CTAs) and hedge funds, which employ two different strategies: directional trading and arbitrage activities. Directional trading (direct long or short) is often driven by CTAs and price momentum strategies. As Bitcoin price rises, long positions increase synchronously, and vice versa. Since Bitcoin price has remained flat or declined since March, we have also observed a decrease in long positions, which aligns with the changes in these momentum strategies.
Short positions in leveraged funds are mainly driven by arbitrage activities and are positively correlated with the basis between futures and spot prices. Considering that the basis usually increases with the rise in spot prices, short positions may take advantage of this price dynamic growth. Now, with the narrowing of the spot basis, we see a corresponding decrease in short positions.
Information collected from other reports is relatively limited.
To ensure the completeness of the report, we include some other categories of reportable traders that were not mentioned above. Although the information obtained from these traders is limited, their position sizes are usually small, and their investment motivations are difficult to interpret due to the diverse nature of this category.
GBTC halts continuous outflows due to potential ETF demand from retail investors.
GBTC broke the record for daily outflows since January 11 last Friday, ending 78 consecutive trading days of outflows and experiencing inflows for the first time. During this period, investors redeemed $1.75 billion and converted it into cash, which may be reinvested in lower-cost competitor funds. Although we cannot determine the specific reason for the sudden influx of $63 million, according to the 13F filings by holders, demand for ETFs seems to be mainly driven by investment advisory firms, brokerage firms, and retail investors. Investment managers with over $100 million in assets under management are required to submit 13F position reports and should submit them within 45 days after the end of the quarter (by May 15). Although the submission deadline has not yet arrived, a quick analysis of the filings submitted so far shows that the majority of spot ETF holders (over 95%) are unknown, indicating that they have not triggered the requirement for 13F submissions. We plan to conduct a comprehensive analysis of the holders after the submission deadline.
Difficulty adjustments may lead to a corresponding decrease in hash rate due to uneconomical mining.
Last Thursday morning, the Bitcoin difficulty adjustment decreased by 5.6%, indicating that some computing power has gone offline. This is the first comprehensive difficulty adjustment since the halving and may more accurately reflect the adjustment behavior of miners after the block subsidy is reduced by 50%. The previous difficulty adjustment window covered the halving event and could not fully understand the potential hash rate adjustment by miners. In addition, with the launch of Runes, the surge in fees has made our view of miner income less stable. Now that hash price has stabilized within a more predictable range, miners have a clearer understanding of the economic situation.
Although the difficulty adjustment should increase the daily income of the remaining miners, the hash price has significantly decreased since the halving. This is almost entirely due to the 50% reduction in block subsidies, which is a direct consequence of the halving. Another factor is the normalization of fees, as the launch of Runes has become a thing of the past. Bitcoin price has also stopped its rapid rise, which is a positive factor for hash price in the first quarter.
Why do miners go offline? Based on an estimated network hash rate of 620 EH/s and a power consumption of approximately 1 MW (assuming the use of Antminer S19 Pro (110 TH/s)), the reduced computing power is about 35 EH/s. Possible reasons include operational and economic factors. Although factors such as extreme weather may affect mining operations in the short term, we speculate that this reduction is mainly due to economic reasons. The halving has led to a decrease in hash price, reducing the value miners derive from the provided hash and raising the breakeven price level for mining machines. After previous halvings, the highest difficulty reduction was 5.4% to 14.7%.
Market dynamics:
Bitcoin has continued to rebound around the $60,000 low, lacking a clear direction as traders closely watch for the next catalyst after the slowdown in ETF flows. Investors may find clues in the Consumer Price Index for April, which will be announced next Wednesday. A slowdown in inflation is seen as a positive sign for interest rate cuts, while higher-than-expected inflation may be a reason to maintain interest rates for a longer period. In the past week, risk assets such as stocks have performed well, with the S&P 500 index rising by 3.0% and the Nasdaq Composite index rising by 3.2%. The bond market has performed well this week, with investment-grade corporate bonds rising by 1.0%, high-yield corporate bonds rising by 0.5%, and long-term US Treasury bonds rising by 1.9%. Gold has risen by 1.3% this week, reaching a new all-time high, and oil prices have also risen by 0.4%.
Tags:
2023 market trends
ETF
NYDIG
Traders
Futures
Bitcoin
Bitcoin price
Miners
Source link:
https://news.marsbit.cc/20240516224002197664.html
Note: The opinions expressed in this article do not constitute investment advice.
Original article link: https://www.bitpush.news/articles/6740061
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