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- In the wake of the collapse of the FTX exchange, a new CoinShares report shows that institutional players are betting on a further price fluctuation of crypto assets.
- The bear traders believe they still have more time before a crypto market turnaround towards a bullish run.
A new CoinShares report shows that more institutional players are gambling on the fact that the prices of Bitcoin and other crypto assets will continue to plummet, sending the already-tense industry into further panic.
For most of the year, the performance of digital assets has been underwhelming, with a series of bankruptcy issues rocking the volatile space. The FTX debacle seems to have hit the nail on the coffin.
Investors’ negative sentiment on the market
According to the report, institutional investors are shorting digital assets due to their negative sentiment. In addition, the inflows from these shorts represent 75 percent of the total inflows in the industry, which is by far the largest on record.
By shorting crypto assets, investors are betting on the price of these crypto assets going down. Over the past week, investors rushed to bet their money on the prices of two leading crypto assets, Bitcoin and Ethereum. However, it is worth noting that the prices of these digital assets have declined further.
1/ What is the crypto market sentiment this week?
A deeply negative one with the largest inflows into short-investments on record.Our Head of Research @jbutterfill shares his latest insights.
All the data can be found in our weekly report:https://t.co/mCc3kw8twn pic.twitter.com/7Z7HMf8gi9— CoinShares 👩🚀 (@CoinSharesCo) November 21, 2022
According to the report, the assets under management in the crypto investment firms are at their lowest in two years, approximately $22 billion. This points to an aggregate sentiment with a profoundly negative outlook for this asset class.
Furthermore, the report noted that as of last week, more investors than ever were putting $14 million into short-Ethereum investment products. Per CoinShares, the accrued interests in shorting assets are “likely a straight outcome of the latest collapse of the FTX Group.”
The report added that last week witnessed investors cashing out $6 million from altcoin trading, mainly from XRP, SOL, MATIC, and BNB.
The crypto market was already battered even before the publicized news of the crash of one of the largest crypto exchanges, FTX. Reports indicate that the Sam Bankman-Fried-led FTX used customers’ funds to make risky investments through its sister trading firm, Alameda Research.
After a thorough audit, the company admitted to not having customer reserve funds to stabilize the situation, which ended with the freeze of withdrawals and consequent bankruptcy filing.
BTC shorts spiked by over 10%
CoinShares’ head of research, James Butterfill, revealed last week that the short inflows for the most prominent crypto token, Bitcoin, have hit $18.4 million. This represents an over 10 percent increase in seven days.
Butterfill also estimated the differences between the long and short BTC positions to be $4.3 million, indicating some market uncertainties about the future price of Bitcoin. The report added that the total assets under management (AUM) for BTC shorts are more than $173 million, which is almost the previous record of $186 million.
According to the crypto market’s Fear and Greed Index, investors are in a state of “extreme fear” on a scale of 22 points, which moves from 0 to 100. 0 is the stage of absolute panic, where no one has the nerve to invest, and 100 indicates a complete state of greed with no trader willing to sell. With the year coming to a close, the panic may likely increase, barring a last-minute change in market conditions.
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