Hedge Funds Flip Bullish on Bitcoin in Rare CME Positioning Shift

CME Hedge Funds Turn Bullish as Bitcoin Basis Trade Loses Appeal

Hedge funds trading Bitcoin futures on the Chicago Mercantile Exchange have shifted to a net-long position, according to Ki Young Ju, CEO of blockchain analytics firm CryptoQuant. The unusual change suggests professional investors are becoming more optimistic about Bitcoin’s near-term direction.

“Hedge funds on CME have flipped net long on bitcoin futures,” Ki Young Ju said, describing the move as unusual after years of structural short positioning linked to the basis trade. He argued that a conventional carry strategy cannot operate with an overall net-long futures position, suggesting that institutional traders may now be positioning for further gains in Bitcoin.

Leveraged funds have traditionally held net-short positions in CME Bitcoin futures because of the basis trade, a market-neutral strategy. Under the approach, traders purchase spot Bitcoin or Bitcoin ETFs while simultaneously shorting futures contracts. The strategy seeks to capture the difference between futures and spot prices rather than profit directly from a rise in Bitcoin.

That activity has kept hedge fund futures positioning predominantly negative for years.

The basis trade, however, has become less profitable. The annualized three-month Bitcoin futures basis has dropped to around 3%, below the approximately 3.8% yield available from two-year U.S. Treasury securities.

With the spread offering less potential return, traders have less incentive to maintain the strategy, particularly after accounting for financing costs, margin requirements and execution risks.

Bitcoin has climbed back above $65,000 after falling to roughly $58,000 on July 1. The shift among CME leveraged funds from persistent futures shorts to an overall net-long position adds another bullish element to the recovery.

Some of the change could simply reflect traders unwinding existing basis-trade shorts. However, the move into net-long territory means leveraged funds now hold more CME futures longs than shorts, marking a potentially significant change in institutional positioning and sentiment toward Bitcoin.