Going Long on Bitcoin Wins Most Crowded Trade; Shorting the USD Comes Third

Bitcoin’s meteoric rise in the past few months and a new all-time high in January has resulted in increased exposure and more investors jumping on the train. Unsurprisingly, the leading cryptocurrency bulked a new trend this month, becoming the most crowded trade according to a recent survey by Bank of America.

The survey, which samples the opinion of fund managers that manage over $500 billion in assets, showed that a long position on Bitcoin overtook ‘long tech stocks,’ knocking the latter off the top spot for the first time since October 2020.

A long position represents a bet that an asset’s price will increase over a certain period. For a long time, traditional investors have held significantly long positions on tech stocks. Bitcoin grabbing some of that attention reflects the market’s general outlook, especially as BTC broke out above its previous all-time high.

Bitcoin 3-Month Chart

Meanwhile, many surveyed fund managers (19%) also admitted to taking more risks than normal to bring greater results for their clients.

Shorting the USD Comes Third

After a long-position on tech stocks comes in second place as the most crowded trade, there is a surprise contender in third place – investors shorting the U.S dollar.

According to the survey results, a record 92% of the fund managers expected higher inflation in the coming year, while 83% claimed there would be a steeper yield curve on government-issued bonds.

The low optimism on higher yield bonds is reportedly at record lows that surpasses numbers during past key U.S economic events such as the 2008 Lehman Brothers collapse and the 2016 presidential election.

Source (BofA)

Talks of further inflation of the US dollar are heightened by announced plans by the president-elect, Joe Biden, to distribute a $1.9 trillion stimulus package in the days after he assumes presidential duties.

Bitcoin proponents believe that the current macro-economic conditions set the tone for the cryptocurrency’s price to soar further, and only time will tell if that prediction comes true. Bitcoin trades at $37, 350 at the time of writing, representing a 25% year-to-date (YTD) and a $679 billion market capitalization.

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Author: Wilfred Michael

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Author: Wilfred Michael