Bitcoin has been booming as of late. Since last October, the world’s number one digital currency by market cap has been surging like no other asset on planet Earth. This has been both a good and a bad thing in the sense that it has allowed a lot of crypto holders to get rich and expand their portfolios.

Bitcoin May Have Some Opposition from Hedge Funds

However, it’s also had a negative side in that several hedge funds are now attempting to short the currency and bet against it. After all, when something goes super high really fast the way bitcoin did, it’s hard to assume that this will continue for an extended period. As the saying goes, “What goes up must come down,” and according to these hedge funds, bitcoin is no exception.

According to data from crypto analysis company The Block, hedge funds have significantly increased their BTC short positions. These positions are now the biggest they have ever been, and the bitcoin futures arena is growing like it never has before. While these funds are working against the cryptocurrency, many retail players and standard traders have also used this opportunity to get into the market, which has managed to stabilize bitcoin activity as of late.

Frederique Carrier – head of investment strategy at RBC Wealth Management – explained in a recent interview that he believes the spread of COVID-19 may have something to do with this. That many people are bored at home looking for something to do, and bitcoin represents the most solid financial opportunity. He states:

Being stuck at home due to pandemic lockdowns and restrictions seems to have spurred an influx of day traders. Investor attitudes are being shaped by the headline-making gains of some high-profile issues. For example, the 35 percent gain made by bitcoin in the first nine days of 2021 on the heels of a fivefold surge in price from March to December 2020; or the more-than-sixfold increase in GameStop shares in less than two weeks to January 26; or even Tesla, now the fifth-largest stock in the S&P 500 by market capitalization with a market cap larger than that of the major U.S., European and Japanese automakers combined.

So Many New Users

Brokers such as e-Toro claim to have added as many as five million new users throughout 2020 and has now potentially registered as many as one million during the first month of 2021 alone. Nicholas Pelecanos – head of trading at blockchain firm NEM – explained:

With Robinhood halting trading of certain assets like GameStop and Nokia and Nasdaq president and CEO Adena Friedman calling for regulations to prevent retail investors from coordinating on social media, the case for cryptocurrencies only grows stronger. I believe we will witness a new wave of investors come over bitcoin and other major crypto assets due to this debacle.

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