Short Bitcoin Contracts Increase

Net short bitcoin contracts surged in the week of trading kicking off on Dec. 26, as investors bet the bitcoin futures traded on the Cboe Global Markets would decline.

According to news from Reuters, citing data from the Commodity Futures Trading Commission (CFTC), net short bitcoin contracts increased to 1,801 in the week starting on Dec. 26. In the previous week, short contracts were at 1,507. The increase comes as bitcoin prices have been very volatile. After trading around $19,000 on December 18, the value of bitcoin has been plummeting. Recently, bitcoin was valued at close to $15,000. It has recouped some of its losses, following particularly volatile trading in recent weeks. 

Reuters pointed to comments from ARK Invest, an asset manager in New York that oversees tech-focused ETFs (exchange-traded funds), which said investors are showing “irrational behavior” when it comes to bitcoin:  “Historically, these signs have marked the top, either cyclically or securely, for an asset class,” said ARK Invest, according to Reuters. ARK did credit Cboe and CME Group for their moves last month to create bitcoin futures as ushering in a new era for financial innovation.

The shorting of the bitcoin futures comes as Goldman Sachs is warning about the negative impact it can have on the U.S. economy. In the report “10 Questions for 2018” issued late Friday (Dec. 29), Jan Hatzius warned that financial imbalances within the credit market and cryptocurrencies could cast a shadow on the U.S. economy for 2018.

“Asset valuations in some areas — especially credit — have risen to high levels by historical standards … While we have not seen the type of large credit expansions that would be most worrisome for Fed officials concerned about financial imbalances, there are now some signs of speculative behavior in financial markets, e.g. the cryptocurrency boom,” Hatzius wrote in the report.

According to Fortune, Hatzius also gave predictions about Federal Reserve rate increases, 2.6 percent growth for U.S. gross domestic products, a 3.5 percent decline in the unemployment rate and the yield curve not inverting.

Hatzius is not the only one keeping a close eye on bitcoin and other cryptocurrencies. Also this week, India’s finance minister has joined the list of people decrying the trading of bitcoin and other associated cryptocurrencies, claiming that it is, at its core, the same as buying into a Ponzi scheme.



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