Is Short Bitcoin ETF Exposure Ready for a Squeeze?
Bitcoin’s short exposure has found favor with both retail and institutional investors over the past couple of months. For most, this position in the digital asset has paid off, given its continued decline over this time. Even then, investors have not eased their exposure to this investment instrument. Total assets under management for short bitcoin ETFs are on the rise, fueling speculation of a potential short squeeze.
Investors increase their exposure
When the ProShares Short Bitcoin ETF first debuted earlier in 2022, it came out with a lot of support from investors. These investors were already accustomed to longing bitcoin through the ETFs offered, but had finally been given the opportunity to short the digital asset in a bear market. It was one of the largest crypto ETF launches, reaching more than 3,000 BTC in exposure in less than a month.
Since then, there has been a somewhat steady increase in exposure to this ETF. By the end of August 2022, it had reached a new all-time high of 5,335 BTC. This followed the decline in the price of BTC below $19,000, creating a trend of increased exposure each time the price dropped.
This trend has also continued into the month of September, which has been a brutal month for the digital resource. Short BTC ETF exposure had fallen in early September as investors took profits, but it had started to grow again, approaching all-time highs.
ProShares’ BITI touches 5,270 BTC in exposure on September 23rd, the third largest so far since launch. This increase had once again coincided with the fall in the price of bitcoin to the low $18,000s before staging a recovery.
Is Bitcoin Short Squeeze Coming?
The increased exposure to short bitcoin ETFs may well lead to another short squeeze. Investors had already started to take profits from their position, which led to more than $5 million in outflows last week, but they continue to remain bullish on shorting the digital asset.
Now, investors putting in more money below local bottoms could mean they traded in a bad way, but it’s also important to note that the market has continued to trend lower with each recent drop. This has also had an impact on spot trading as there is less buying and more selling.
BTC price recovers above $19,000 | Source: BTCUSD on TradingView.com
If demand for short BTC continues to rise and reach a new high, a resulting short squeeze could see the price of bitcoin fall back to $17,000. A small change in the current investment trend, which is more money flowing into the short BTC ETF even when the price of bitcoin is recovering, could easily lead to this.
Bitcoin’s price is still showing a slight recovery, lending credence to the short positions investors are taking. It is holding weakly at the $19,000 level. So further decline could push the Short BTC exposure to a new high.
Featured image from BeInCrypto, charts from Arcane Research and TradingView.com
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