Institutional Interest in Shorting Ethereum Dries Up – Trustnodes

Institutional Interest in Shorting Ethereum Dries Up


Smart money is seemingly betting ethereum has bottomed as months of shorting by hedge funds has given way to plummeting Over the Counter (OTC) eth borrowing.

“Some of our largest single originations to date were ETH loans in March and May to hedge funds. Over the second half of the year, these hedge funds began covering positions as they realized profits and the short interest in ETH was replaced by other alternative assets.”

So says Genesis Global Trading, a registered crypto-broker that has lent about half a billion dollars worth of crypto to hedge funds and other entities.

“The bottom is in for ETH,” says Ryan Selkis, who came to prominence in 2014 after revealing MT Gox was bankrupt at a time when MT Gox customer support was saying funds are safe.

“Plenty of short interest, but genesis lends to smart money,” Selkis said. Referring to eth shorts on Bitfinex being near all time high.

Unlike what may be unsophisticated traders, however, hedge funds are apparently no longer daring to short ethereum.

Eth borrowing by hedge funds and other entities, October 2018.

As can be seen, hedge funds were willing to pay an 11% interest rate to short eth bigly back in March just before its price plunged from circa $900 to $350.

It then recovered to $800, but again plunged in June to circa $400, and continued to go lower, reaching what may be a bottom on September 12th at $167.

With eth’s price now standing at about $200, it looks like hedge funds are not willing to play any longer. Moving off to Ripple and seemingly staying stubborn in regards to bitcoin.

Ethereum’s price on weekly candles, October 2018.

Bitcoin, however, may have a different interpretation because Genesis says:

“Our clients are entirely institutional and include hedge funds, trading firms, and companies that use digital currencies as working capital…

Bitcoin demand remained consistent throughout the year, as it is the most widely used asset for non-speculative reasons, like working capital in remittance and arbitrage trading across exchanges.”

In other words, institutional investors are not borrowing bitcoin to bet on its price, but to use it as a backend in international transfers or in arbitrage transfers between exchanges.

While for eth they specifically say: “Some of our largest single originations to date were ETH loans in March and May to hedge funds,” with hedge funds being sort of casino desks where testosterone fueled young men and some estrogen driven women bet on up or down ostensibly to hedge and manage risk.

So allowing a narration of sorts where one can speculate they really though eth’s price was going down back in spring to the point they were willing to bet their house on it – borrow eth at an interest rate of 11%. While now they seemingly think there is no longer any down buffer left.

Price could of course still go down. On probabilities, however, there might no longer be much room below for gains to justify the risk. So they staying out of it.

Well, out of shorting. Whether they are accumulating by buying all these eth from miners and ICOs we probably won’t know with some degree of certainty until months after the event.

Leaving us to only guess for now that it might be the case based on that nice somewhat straight line eth’s price has managed to retain for the past few weeks, suggesting maybe cryptos do have a floor after all.



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