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The number of bitcoin long contracts held by institutions has reached an all-time high, according to the CME. However, CME’s most recent Commitment of Trader report shows hedge funds are at a record-high for bitcoin shorts, Cointelegraph reports.

What does this mean?

It indicates there is a big difference in the perception of bitcoin’s short- to medium-term trend between hedge funds and institutions.

CME Bitcoin futures net open interest. Source: Skew

Why are hedge funds aggressively shorting bitcoin but not institutions?

Hedge funds typically implement varying strategies to generate returns for investors. Hedge funds will often utilize derivatives and opt for a riskier strategy.

In contrast, institutional investors who are allocating a percentage of their portfolio to bitcoin likely have a long-term strategy. This means they are not focused on the crypto’s short to medium-term performance.

Some analysts say that hedge funds are likely short on bitcoin to provide liquidity to institutions longing the top cryptocurrency.

When institutional investors increasingly build up their long positions, there need to be sellers on the CME to balance the order book, Cointelegraph notes.

Cryptocurrency analyst Mitchell Nicholson explains: “Many HFs are likely shorting CME futures hedged to capture the basis or providing liquidity to the institutions going long.”

Technically, hedge funds might also be shorting bitcoin after repeated rejections of a key resistance level. Bitcoin has been unable to break out of the $11,700 to $12,000 resistance range since August.

For over two months, bitcoin has been mostly ranging between $10,500 to $11,700, struggling to show upside momentum.

After bitcoin’s recovery from $3,600, hedge funds may be expecting a significant pullback.