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Gate Blog
Your Gateway to crypto news and insights
CoinShares reported that a record amount of funds flowed into Short Bitcoin Funds
30 September 09:59
TL: DR
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Mixed reactions on Bitcoin as investors seem to keep losing trust judging from the new inflow and shorting trends.
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Last week saw an increase in funds inflow for Bitcoin, but most of it went into short Bitcoin funds. A record high of $93m
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CoinShares released a report showing outflow and inflow data on Bitcoin, Ethereum, Solana, and XRP.
Introduction
Cryptocurrency prices in recent months have plunged apace with the rising inflation. Bitcoin has lost approximately 60 percent of its value since the start of this year, currently trading at the $19,000 threshold. Ethereum lost more than 64 percent in the same period, currently a bit above $1,300.
Cryptocurrencies shorts have gained prominence, perhaps, due to the continuous price plummet with investors seeking to make a profit out of the dip.
Judging by records, short Bitcoin positions have reached a new high. Money is sweeping into short Bitcoin funds in chunks as long Bitcoin funds keep recording outflows, according to new research released from digital investment and crypto research giant CoinShares.
The CoinShares Report
According to this report, digital asset investment products recorded inflows running to a total of $7m last week, in a streak of low activities.
Bitcoin saw inflows totaling US$17m, the first inflows following a 5-week outflow totaling US$93m. Meanwhile, short-Bitcoin also saw minor inflows totaling US$2.6m, with total AuM close to a record US$169m.
For Bitcoins, an inflow of $17m was recorded after a 5-week streak of outflows totaling $93m. Short Bitcoins saw some minor inflows going to the sum of $2.6m bringing total AuM to the tune of $169m.
By location, US and Germany claimed their shares to outflows with $14m and $11m, respectively. At the same time, Sweden and Canada contributed $16m and $4.2m, respectively.
Flow patterns post-Ethereum Merge indicate persistent caution amongst investors. With $2.1m leaving the funds last week, it is the second-largest of late, giving a total of $15m in outflows over four weeks. A run of outflows that totals $80m.
Other altcoin-backed funds like Solana and XRP saw inflows of $1.4m and $0.3m, respectively.
For the purpose of a better understanding, let's break down a few terms.
What is short selling?
Short selling (shorting in short) is a strategy in investment whereby an individual aiming to benefit from a fall in the price of an asset places a bet on it. To do this, some investors may borrow the asset from an exchange or a broker to sell it at the current market price and then repurchases it when the price has fallen. thereby making a profit from the price difference.
Shorting is a traditional practice in the financial markets that have been adopted into the crypto space. Crypto traders often use this mechanism to hedge against a potential position risk or maximize profits. One of the popular ways of shorting cryptocurrencies includes Spot Margin, futures derivative trading, short-selling Bitcoin Assets, and Bitcoin CFDs.
What do inflows and outflows mean, and what do they indicate?
In simple terms, inflow alludes to the volume of a particular cryptocurrency that has entered the exchange within a specific period. An outflow refers to the amount of a cryptocurrency that left the crypto exchange over a given period.
For example, if Exchange A has Bitcoin listed on its platform, the amount of Bitcoin sent into the platform from users in 24 hours is known as the daily inflow. On the other hand, the amount that has left the exchange and into user accounts is the outflow.
During a bull market (where there is high investor confidence and optimism), holding (buying to sell later) is common, which drives the flow of assets from exchange platforms to wallets. A temporary shortage is caused, which potentially increases the asset's appreciation. This process illustrates an outflow.
With a bear market, on the other hand, holders attempt to reduce their losses by moving their crypto assets onto exchange platforms. Short sellers also try to utilize the period by listing borrowed cryptocurrencies for sale, thereby adding to the abundance of cryptocurrencies in supply. This causes a reverse flow with the potential to lower the asset's value due to the increased supply. This second scenario illustrates an inflow.
Conclusion
The CoinShares report, yet again, shows that the current market sentiment is not exactly anticipating a bullish run despite the extent of the dip. Investors are left cautious about what effect any actions will have on their monies, with some picking a stance and going ahead to short their cryptocurrency assets.
With events still unfolding around the Ethereum merge and the already troubled Ethereum fork ETHPOW, no two weeks will be the same in trends in the cryptocurrency world, firmly establishing the claim that it is the most exciting and destructive technology of the decade.
Author: M. Olatunji, Gate.io Researcher
Disclaimer:
* This article represents only the views of the observers and does not constitute any investment suggestions.
*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all other cases, legal action will be taken due to copyright infringement.
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