U.Today – The drop to $65,000 was clearly unexpected, and the reasons behind it were quite murky and determining what exactly caused it is complicated. However, we may have an answer.
Recently, cryptocurrency hedge funds have completely abandoned Bitcoin. Over the past 20 trading days, they have reduced their exposure to the BTC market to just 0.37. This is the lowest level since October 2020. The charts show the Bitcoin price trend from 2019 to 2024, emphasizing notable ups and downs.
Hedge funds' reduced exposure to Bitcoin offers a major reason for the cryptocurrency's recent steep decline. The chart below illustrates the one-month rolling beta of global crypto hedge funds against Bitcoin, demonstrating the degree to which hedge fund performance is influenced by changes in the price of Bitcoin.
A hedge fund's performance follows that of Bitcoin if its beta value is one, while a beta less than one denotes reduced exposure. The drop to a beta of 0.37 indicates that hedge funds are much less vulnerable to changes in the price of Bitcoin than they were a few years ago.
Hedge fund exposure last hit this low point in October 2020, just before Bitcoin experienced a notable bull run. Hedge funds are well known for their calculated actions and often have access to cutting-edge data and industry insights. They may have expected more declines or volatility based on their Bitcoin withdrawal.
There are several reasons for this cautious approach, such as changes in domestic investment strategies, macroeconomic conditions or regulatory uncertainties. Since there has been less exposure, there has likely been more selling pressure on Bitcoin, which has pushed the price below the crucial $65,000 mark.
Because they often have significant capital under their control, hedge funds have significant influence on the market. Market mood and price action greatly affect the flow of funds.
This article was originally published on U.Today.
