Bitcoin coasted over the $20,000 mark Wednesday morning even as recession fears linger among investors and an institutional product to short the asset gained traction last week.
Bitcoin rose some 2% in the past 24 hours, continuing a gradual recovery after last month’s sudden drop to the $17,700 level. The asset faces resistance at the $21,500 level, price charts show, while support exists at the $18,800 mark.
Bitcoin is currently ranging between the $21,000 and $18,000 levels. (TradingView)
The recovery came as institutional traders piled on the ProShares Short Bitcoin Strategy ETF (BITI), a recently-launched product that bets against the prices of bitcoin. It saw some $51 million worth of inflows over the past week, as per a report earlier this week by crypto fund CoinShares. The figure is a record high since the ETF’s launch in late June.
“Investment products saw inflows totaling US$64m last week,” CoinShares analysts said. “Although the headline figures obscure the fact that a significant majority were into short-bitcoin investment products (US$51m).”
However, CoinShares said that the inflows into BITI were likely to it being one of the first offerings that allow shorting exposure via futures contracts for investors as opposed to a change in sentiment.
“The inflows into short-Bitcoin possibly due to first-time accessibility in the U.S. rather than renewed negative sentiment,” CoinShares said, pointing out that bitcoin long products from Canada, Europe and Germany saw a combined $20 million in inflows.
However, some market observers said the inflows into short positions suggest investors expect a downtrend instead of continued recovery in the coming weeks.
“People who are involved in the market think that the bottom is still to come, so if they can’t make money on the rise, they want to make money on the fall by shorting Bitcoin,” shared Pawel Cichowski, head of dealing at crypto exchange XBO, in a Telegram message.
“With signs of a global recession coming up and the bond yield curve inverting, nobody knows for sure where the price of bitcoin will go next. However, based on ProShares statistics, people are preferring to expect the worst,” Cichowski added.
The increase in short bitcoin funds outflows comes weeks after institutional investors withdrew over $423 million from crypto products, as earlier reported.
Such moves come amid rising concerns of inflation and recession among investors. In an appearance at the European Central Bank’s annual forum last week, U.S. Federal Reserve Chairman Jerome Powell reiterated the central bank’s commitment to increasing interest rates to curtail inflation.
Powell added he was more concerned about the challenge posed by inflation than about the possibility of higher interest rates pushing the U.S. economy into a recession. The latest forecasts from Bloomberg Economics have pegged the odds of a U.S. recession in the next year at 38%.
Meanwhile, market sentiment remained mixed among equity traders on Wednesday. Hong Kong’s Hang Seng, Japan’s Nikkei 225, and the Shanghai Composite dropped over 1.2% since Wednesday’s start, while Europe’s Stoxx 600 and Germany’s DAX gained 1.3%.
Premarket futures in the U.S. dropped nominally, while Crude Oil WTI regained the $100 mark after plunging below that level on Tuesday.
