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Report: Hedge Funds Are Gearing Up to Bet Against Bitcoin
CME Capital’s announcement last month that it would be launching a bitcoin futures contract by the end of the year has been seen as another step toward mainstreaming cryptocurrencies by introducing bitcoin into the same market as oil and gold.
However, CME Capital’s planned futures contract has also galvanized hedge funds to prepare shorting bitcoin, according to Bloomberg. Speaking to “more than a half dozen people trading the assets,” Bloomberg found that hedge fund managers believe the introduction of futures contracts “will make it much easier to bet on a decline” for bitcoin.
In addition to CME Capital, Cboe Global Markets Inc. and Nasdaq have also announced plans for a bitcoin futures contract.
Some see the bitcoin market as “one of the greatest shorting opportunities ever,” said Lou Kerner, a partner at Flight VC who invests in the cryptocurrency. “You have a lot of zealotry, and a lot of people, including me, who think it’s the greatest thing to ever happen in the history of mankind. You have a lot of people who think it’s a bubble and a Ponzi scheme. It turns out both of them can’t be right.”
Bitcoin has been especially volatile recently, plunging nearly 20 percent in less than 90 minutes on Nov. 29, to $9,009 after briefly topping $11,000. The price has since recovered, and was trading at more than $11,332.01 at 11:42 a.m. in New York on Monday, a 3.9 percent jump since Friday.
Michael Moro, chief executive officer of Genesis Global Trading, tells Bloomberg that the current exchanges don’t let investors short large amounts of money on bitcoin, which the futures contracts will change. Meanwhile, Craig Pirrong, a business professor at the University of Houston, says that making “it easier to short might keep the bitcoin price a little closer to reality.”
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