Hedge funds close bitcoin shorts on CME, bet on $65K rally

Hedge funds have flipped the script on bitcoin. After years of betting against the cryptocurrency’s price through so-called structural shorts, many are now unwinding those positions in favor of long bets, signaling a rare shift in market sentiment. The move follows bitcoin’s rally past $65,000, a level not seen since late 2021, and coincides with growing institutional acceptance of the asset.

This reversal marks a significant turn from the past two years, when hedge funds heavily shorted bitcoin through derivatives like CME futures. The structural shorts were a bet that institutional demand would remain weak and that price volatility would keep traders on the sidelines. But those assumptions are now under pressure. Bitcoin’s recent surge has been fueled by inflows into spot exchange-traded funds (ETFs), renewed optimism around the upcoming halving event in April, and signs that macroeconomic conditions—like falling inflation and potential Federal Reserve rate cuts—could benefit risk assets.

The scale of the shift is still taking shape, but early data suggests a notable reduction in short positions. According to CoinDesk’s sources, some of the largest funds have started closing short positions and opening long contracts on the Chicago Mercantile Exchange (CME), a key venue for institutional crypto derivatives. Activity on CME is closely watched because it reflects bets from professional traders rather than retail speculation. The exchange’s bitcoin futures open interest has climbed in recent weeks, with the long-to-short ratio improving as shorts exit.

What happens next depends on whether the rally can sustain momentum. If bitcoin holds above $65,000, more hedge funds may follow suit, reducing structural shorts and pushing prices higher. But if the rally stalls—triggered by regulatory uncertainty, macroeconomic shocks, or profit-taking—the unwinding of shorts could reverse just as quickly. Either way, this shift shows that even in crypto, the smart money is recalculating its bets.