Hedge Funds Flip from Shorts to Longs on Bitcoin, Analyst Says
Cryptocurrency analyst James Van Straten reported speaking with three hedge fund managers who profited from recent short positions on Bitcoin and bitcoin-related products. According to Van Straten, most of these funds closed their shorts late last week or early this week and have reverted to long positions. He characterizes this rotation as a potential market “bottoming signal.” Van Straten also addressed claims by Arthur Hayes that Tether is heading for bankruptcy, dismissing them based on Tether’s Q3 2025 reserve report. He noted that even a hypothetical 30% decline in Tether’s gold and Bitcoin holdings would not erase its core assets; Tether would still reportedly hold $158.4 billion in core assets, covering roughly 91% of liabilities and leaving a $6.8 billion buffer. Key takeaways for traders: hedge funds’ rapid switch from short to long may increase buying pressure on BTC in the near term; profit-taking and position flips can drive volatility; concerns about Tether’s solvency appear overstated according to Van Straten’s reading of the reserves, which could ease stablecoin-related market anxiety. This is not investment advice.
Bullish
Van Straten’s reporting that multiple hedge funds profited from shorts and then flipped to long positions constitutes a significant demand-side shift. When institutional players close shorts and establish long exposure, they create buying pressure that can propel price recovery and reduce downside risk—hence a bullish short-term outlook. The note that funds realized gains before flipping suggests profit-taking has been executed, lowering the likelihood of immediate panic selling but increasing near-term volatility as positions reprice. The dismissal of Tether insolvency claims using Q3 2025 reserve figures also reduces a major systemic fear factor; confidence in stablecoin backing tends to stabilize crypto liquidity and derivatives markets. Historically, similar hedge-fund flips (short-covering rallies) have produced sharp, short-to-medium term price rebounds in BTC (e.g., short squeezes in 2019–2021). Risks remain: if macro events or leverage unwind coincide with the flip, volatility could still trigger pullbacks. For traders: expect increased intraday volatility and potential bullish bias over days–weeks; monitor funding rates, open interest, and stablecoin flows for confirmation; use risk management given possible rapid reversals.