The post Bitcoin shorts drop 82%, hedge funds cut exposure – Rally or more caution? appeared on BitcoinEthereumNews.com.

Leveraged hedge funds have cut their short exposure to Bitcoin [BTC] on the CME Futures from $444 million seen in August to $78 million as of mid-January – A 82% decline that may be bullish or bearish depending on other factors.  Source: CryptoQuant Based on the attached chart, such a decline in short exposure by leverage funds coincided with the local price bottom and, to some extent, may be construed to be somewhat bullish for BTC.  Bitcoin basis trade craters to 5% However, leveraged funds’ moves are always zero-sum for Bitcoin as they buy spot U.S spot ETF and shorts CME Futures to pocket the price difference, commonly known as a basis trade or yield.   This lucrative yield has significantly dropped from nearly 10% to 5% over the past few months as the BTC price dropped by over 30%, making it less attractive.  Source: Velo According to some analysts, these funds will not only reduce short exposure when the yield becomes less attractive, but they will exit spot BTC ETFs as well. This could likely drive ETF outflows.  In fact, throughout this week, the ETFs saw a cumulative outflow of $1.33 billion. This reversed the strong demand seen earlier in January, which lifted BTC to $98k.  Source: Glassnode But the 30-day average ETF flow flipped negative again, further underscoring overall weak institutional demand for BTC. Put differently, leveraged funds cutting short positions isn’t enough to rally BTC unless strong spot ETF inflows resume again.  That said, this week’s risk-off mode from investors was warranted due to geopolitical escalations and the Japanese bond crisis. What’s next for BTC? But recent updates have shown these risk factors have substantially eased, opening next week to a less volatile macro week, apart from the upcoming Fed rate decision on the 28th of January.  One…

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Filed under: News - @ January 24, 2026 12:18 pm