There is one position in CME bitcoin futures that is larger than any directional view in the market, and it is not a view at all. It is the cash and carry trade, and reading the CFTC release without accounting for it produces the wrong answer about almost everything else.
What the data shows
- Leveraged funds are net −7,491 contracts, against −11,740 at the start of the year, a change of +36%.
- Asset managers are net +2,815 contracts, down from +6,925 over the same period.
- Both legs falling together is the signature of a carry trade being unwound rather than of a directional argument being won.
- Open interest of 19,385 contracts is −13% on the year.
The two legs of the trade
Solid line: asset managers’ net position. Dashed line: leveraged funds’ net position. Contracts, weekly.
Source: CFTC Commitments of Traders, Traders in Financial Futures, futures only. Prices are Coinbase daily closes. Computed by Institutional Asset Journal.
What the trade is
An investor buys bitcoin, or a spot exchange traded product holding bitcoin, and simultaneously sells a CME future against it. If the future trades above spot, which it usually does when demand for leveraged long exposure is high, the gap between the two closes by expiry and the investor keeps it. The position has no exposure to the price of bitcoin. It is a financing trade, and its return is the annualized basis less the cost of funding the collateral.
In the CFTC report the two legs land in different categories. The party selling the future is usually a leveraged fund, so it shows up as a short. The party taking the other side wants long exposure without custody, and often sits in the asset manager category, so it shows up as a long. A large net short in leveraged funds and a large net long in asset managers is therefore not two opposing opinions. It is one trade, counted twice.
Why both legs shrink together
Because the trade is a spread, it stops being worth doing when the spread narrows below the cost of the capital it consumes. When that happens neither party is expressing a view by leaving. They are redeploying collateral.
That is the most likely reading of this year’s figures. The leveraged fund short has moved from −11,740 to −7,491 contracts, and the asset manager long from +6,925 to +2,815. Open interest has fallen with them. A market where one side had capitulated would show the opposite pattern: one leg collapsing while the other held.
A large short in leveraged funds and a large long in asset managers is not two opinions. It is one trade, counted twice.
Institutional Asset Journal
What it changes for an allocator
Two things. First, the widely quoted claim that hedge funds are positioned against bitcoin is an artifact of this structure and should not be read as a forecast. The short is the financing leg of somebody else’s long.
Second, a shrinking carry book removes a buyer of spot. The cash and carry trade requires the arbitrageur to hold the asset or the product that holds it. When the trade is taken off, that holding is sold, and the sale has nothing to do with a view on the price. Some part of this year’s spot supply has that origin.
How this was measured
- Figures are taken from the CFTC’s Commitments of Traders release, Traders in Financial Futures, futures only. That report covers positions held at the close on a Tuesday and is published the following Friday at 15:30 Eastern, so every reading here is three days old on the day it appears. Net positions exclude spread holdings, which the CFTC reports separately. Notional values apply the CME contract multiplier and the Coinbase daily close on the report date. The series is rebuilt from source each week; the CFTC restates prior weeks on occasion and restatements are carried through rather than footnoted.
