Institutional interest in shorting BTC surges, with Bitcoin short ETFs seeing record inflows of $51 million last week

Amid the ongoing turmoil in the cryptocurrency market, institutional traders are piling into the ProShares Short Bitcoin Strategy ETF (BITI), seemingly betting on further declines in bitcoin. BITI is the first U.S. inverse exchange-traded fund (ETF) that offers investors the ability to profit from bitcoin’s declines.

According to a report released by CoinShares , BITI received approximately $51 million in inflows last week, reaching a record high since the ETF was launched at the end of June. Currently, BITI manages 3,811 BTC in assets.

Compared to the $15 million inflows in the previous week, the total amount of funds flowing into BITI increased by 240%. This may be one of the clearest evidences that institutional investors are betting that the price of Bitcoin will not recover soon.

The shorting interest comes as Bitcoin is coming off its worst quarter in a decade. Pessimistic macro forecasts, recession fears and crises at high-profile crypto firms like Three Arrows Capital have fueled bearish sentiment.

The price of BITI reflects the trend of Bitcoin and echoes the short trading of BTC. When Bitcoin falls, the price of BITI rises.

TradingView data shows that since Bitcoin hit an all-time high of $69,000 in early November, BITI has risen 150%, easily outperforming the S&P 500 and Nasdaq 100, which have fallen 18% and 27%, respectively.

“Total inflows into crypto investment products last week were $64 million. The headline figure masks the fact that the vast majority of people are short Bitcoin investment products ($51 million),” CoinShares analysts said.

However, CoinShares said the inflows into BITI were likely driven by investor enthusiasm for new product launches rather than a change in sentiment.

“Inflows into short Bitcoin ETFs may be driven by first-time accessibility in the U.S. rather than renewed negative sentiment,” CoinShares said, noting that long Bitcoin products from Canada, Europe and Germany saw a combined $20 million in inflows.

Some market watchers believe the inflow into short positions suggests investors expect a downward trend in the coming weeks rather than a continued recovery.

Pawel Cichowski, head of trading at crypto exchange XBO, shared: “People participating in the market believe that the bottom is still to come, so if they can’t make money on the rise, they want to make money by shorting Bitcoin on the fall. With signs of an impending global recession and the inverted bond yield curve, no one knows where the price of Bitcoin will go next. However, judging by ProShares statistics, people are betting on the worst-case scenario.”

Investors are increasingly concerned about inflation and recession. As reported earlier, Federal Reserve Chairman Powell appeared at the European Central Bank's annual forum last week and reiterated the central bank's commitment to raise interest rates to curb inflation.

Powell added that he was more concerned about the challenges posed by inflation than the chance that rate hikes would push the U.S. economy into a recession. The latest forecast from Bloomberg Economics puts the chance of a recession at 38% next year.

Data from the Bitpush terminal showed that as of press time, Bitcoin had rebounded slightly to above $20,000, up about 2% in the past 24 hours, but was still down more than 70% from its all-time high.