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The exact reason behind Bitcoin (BTC)’s decline has finally been revealed by U.Today
U.Today’s drop below $65,000 was clearly unexpected, and the reasons behind it were quite murky and determining what exactly caused it is complicated. However, we may have an answer.
Recently, cryptocurrency hedge funds have completely given up on Bitcoin. Over the previous 20 trading days, they have reduced their exposure to the BTC market to just 0.37. This is the lowest level since October 2020. The charts show the price trend of Bitcoin from 2019 to 2024, highlighting notable highs and lows.
Hedge funds’ reduced exposure to Bitcoin offers an important reason for the cryptocurrency’s recent sharp decline. The bottom chart illustrates the one-month moving beta of global crypto hedge funds versus Bitcoin, demonstrating the degree to which hedge fund performance is affected by changes in the price of Bitcoin.
A hedge fund’s performance tracks Bitcoin if its beta value is one, while a beta less than one denotes low exposure. The drop to a beta of 0.37 indicates that hedge funds are much less vulnerable to changes in the price of Bitcoin than they were a few years ago.
The last exposure to hedge funds was at this low point in October 2020, just before Bitcoin saw a notable bull run. Hedge funds are well known for their calculated actions and often have access to cutting-edge data and industry knowledge. They may expect more declines or volatility based on their withdrawal from Bitcoin.
There are a number of reasons for this cautious approach, such as changing internal investment strategies, macroeconomic conditions or regulatory uncertainties. Since there has been less exposure, there has likely been more selling pressure on Bitcoin, pushing the price below the crucial $65,000 mark.
Because they often have large amounts of capital under their control, hedge funds exert significant influence on the market. Market mood and price action greatly influence the flow of funds.