Asset Managers Add to Bitcoin Long Positions Ahead of Price Increase: Crypto Markets Analysis

Institutional investor appetite for bitcoin may be rising despite BTC’s persistently flat trading range.

The "Commitment of Traders" report, released each Friday and reflecting data as of the prior Tuesday, shows that asset managers’ open interest in BTC is now 84% long and 16% short.

The latest figures represent a slight increase from the prior week’s report where asset managers were 80% long (expectation of a rise) and 20% short (expectation of a decline). We’ve seen this metric trend moderately higher since Sept. 6, when asset managers were 74% long BTC.

Asset managers’ holdings show how they are using the large amounts of capital at their disposal, and offer a window into market sentiment.

Prior to Tuesday's crypto price surge, little had changed in bitcoin for weeks. Inflation concerns and macroeconomic uncertainties have driven investor behavior and market volatility. Markets will next be eyeing Thursday’s gross domestic product (GDP) report to gauge economic growth and the likely effects of the Federal Reserve’s hawkish monetary policy.

Current expectations are that the economy grew by 2.4% in the third quarter. This figure would suggest the economy is growing but not too robustly. That would mean the U.S. central bank's interest rate hikes are taming inflation without spurring a steep recession.

One item worth monitoring is a potential shifting relationship between the U.S. dollar and the price of BTC. For much of 2022, BTC and the dollar index (DXY) have maintained an inverse relationship, with the DXY moving higher while BTC trades lower.

Recently that relationship, measured by the correlation coefficient, has narrowed from -0.90 in September, to its current level of -0.54. The correlation coefficient measures the relationship between two assets and ranges from 1 to -1. A reading of 1 implies a direct relationship while -1 reflects the opposite.

While a bit early to take a definitive stance, the DXY has declined since Sept. 27, while BTC has seen relatively little movement over the same time frame. Should DXY and BTC revert to a more inverse price relationship, further declines in the DXY could lead to a quick move higher for BTC.