Bearish Indicator: Bitcoin Short Exposure Surge To New All-Time High

Large institutional investors have since been turning their attention to shorter-term investments. This tracks with retail sentiment following the price decline of bitcoin from the $30,000 territory. This has put the digital asset in a perilous position, and despite the recent recovery that saw BTC touch $25,000, bearish sentiment continues to be the order of the day, causing the inflows into short bitcoin to balloon over this time.

Short Bitcoin Inflows Grow

Short bitcoin inflows have been on the rise for a couple of months now. When the ProShares’ short bitcoin ETF had first launched earlier in 2022, it had seen record BTC inflows. Interest in the short bitcoin ETF had declined after this but quickly picked up once more. 

The most notable of these had been when the price of bitcoin had fallen below $21,000. It had declined to almost half of its all-time high back in early August, showing a reversal in bearish sentiment. However, as the month has drawn to a close, institutional investors have turned their gaze towards shorting bitcoin one more.

Short BTC exposure reaches new high | Source: Arcane Research

Inflows into the Proshares BITI pushed it to a new all-time high with 4,310 BTC recorded on August 29th. Now, it is important to note that this is nowhere near the current BTC long exposure for the Proshares ETF. Rather, the rapid climb in this short period of time points to worsening sentiment among investors.

These spikes have also coincided with the short bottoms that the price of bitcoin has experienced. The first time had been back on July 1st when exposure had reached 3,811 BTC while bitcoin’s price had fallen below $20,000. The same was the case on July 13th and 26th, with bitcoin reaching short bottoms below $20,000 and just above $20,000. So the current trend is in line with historical movements.

BTC recovers above $20,000 | Source: BTCUSD on TradingView.com

With 4,310 in BTC exposure to short bitcoin ETFs, it accounts for a 70% growth in the last two weeks alone. Worsening market sentiment plays a big role in this, with the Fear & Greed Index currently showing a score of 23, putting the market in extreme fear.

This is not at all unexpected, given the recent market trend. The crypto market is expected to continue its bear trend for at least another few months, and short exposure to digital assets such as bitcoin is expected to rise in that time.

Featured image from Phemex, charts from Arcane Research and TradingView.com

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