How cruel do hedge funds want to be? Actually it isn't about being cruel, it is about making money. And hedge funds have an opportunity they could be pursuing which will affect Bitcoin and MicroStrategy.
Bitcoin is traversing slightly above the 19,581.00 as of this writing. Michael Saylor, the CEO of MicroStrategy, announced a couple of days ago his company has bought 480 additional Bitcoin near an average price of 21,817.00.
MicroStrategy is selling for around 164.30 via its listing on NASDAQ as of this morning. Because MicroStrategy holds 129,699 Bitcoin as of the 28th of June, the price of the company is certainly feeling the pressure of the bearish trend in Bitcoin. There is a direct correlation.
Now how can you take advantage of that? Well you may not be able to as an individual, unless you have plenty of money to wager on a massive speculation. However, hedge funds do have huge amounts of money to bet, and they potentially could be setting the table for a 'bloodletting' in Bitcoin and MicroStrategy which could equate into a massive payday for the hedge funds.
Let's say some analyst for one of the hedge funds who is quantifying numbers as part of their job, and is looking for potential weaknesses in the current world of financial affairs takes a long look at Bitcoin and MicroStrategy and smells an opportunity. Let's for a moment, consider the possibility that if the hedge fund believes Bitcoin can sink further and wants to short the digital asset it might be a good idea. Combine that with the notion that MicroStrategy is under pressure and could lose additional value if Bitcoin falls in price. This would set the table for a hedge fund to short both Bitcoin and MircoStrategy.
A combined short on BTC/USD and MicroStrategy is a potential huge payoff. The ability of knowing exact short positions on Bitcoin, also correlates into projections regarding MicroStrategy's outlook. It is the equivalent of a daily double horse racing strategy.
Considering that the market capitalization of Bitcoin is around 373.6 billion USD at this moment around a price of 19,581.00 per coin, this is not a massive amount of money if a handful of hedge funds were to combine in the endeavor of seeking erosion of value in Bitcoin and MicroStrategy.
A reduction in price of Bitcoin also will likely lead to more capitulation among ancillary businesses related to the digital asset. There is a definite fear of contagion among decentralized finance enterprises and some are wobbling already, expect more carnage.
There are no guarantees in trading. Risk is aplenty. However, hedge funds can create much more force in the market and a combination of efforts to seek havoc is actually a healthy part of the marketplace. Hedge funds are able to take risks because they have a better ability to absorb pain for longer periods of time than a mere speculator.
Hedge funds seek weaknesses and strengths and take advantage of errors in the system. Bitcoin and MircroStrategy are vulnerable and together they could sink further.
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