Market defensive sentiment is intensifying! K33: “Shorting the Bitcoin ETF” positions are approaching a new high

Research and brokerage firm K33’s report says that due to weak crypto price action, ongoing geopolitical risk in Iran, and threats from quantum computing, the Bitcoin market is showing a tense “high alert” atmosphere ahead of the upcoming Easter holiday period—typically a time when trading is usually thin. Airpower moves in K33 Research Director Vetle Lunde said in the report that this series of catalysts has triggered yet another wave of “defensive positioning” in the market. Data show that the exposure tied to leveraged short positions in Bitcoin ETFs is currently as high as 9,012 Bitcoins, jumping 22% in just a few days to set the second-highest record in history. He said:

The sudden surge in short positions usually reflects an extreme concentration of market bears, and also shows that traders are in a highly guarded defensive posture.

However, a turnaround may be brewing amid the crisis. Vetle Lunde observed that because the “funding rate” has continued to remain in negative territory, this means short positions in the market are already overcrowded. He believes that such an extreme environment actually closely matches the typical “bottom-building phase” seen in the past. He said: “The 30-day average funding rate (annualized) has been staying negative for 32 consecutive days; if this continues for another two weeks, it will break the record for the most days of negative funding rates set during November to December 2022.”

Easter effect: trading volume and volatility cool down in sync Looking ahead, Vetle Lunde reminded investors to watch for the “long-holiday effect.” He said that in many places around the world, governments observe public holidays before and after Easter, and market trading volume and volatility typically decline in tandem—especially on Thursday before Good Friday and in the days following the holiday. Many traditional financial markets are closed on Good Friday and also on Easter Monday. While the crypto market operates year-round without closures, the report notes that market liquidity is still likely to be affected, especially during the European trading session. Vetle Lunde said that if you compare Bitcoin’s 7-day trading volume during Easter week with the full-year average 7-day trading volume, then since 2019, each year during Easter, trading activity has been below the annual average level. The same pattern is also reflected in Bitcoin’s volatility: each year during the Easter period, the 7-day volatility indicator is also lower than the full-year average.