A long position on bitcoin overtook “long tech” as the trade fund managers said was the most crowded in January, Bank of America’s monthly fund manager survey showed on Tuesday.
For the first time since October, a long position on technology companies was knocked off the top spot, as investors said that long bitcoin was the most crowded trade. A short position on the U.S. dollar was seen as the third most crowded.
A steeper yield curve was expected by a record 83% of investors – that’s more than after the 2008 Lehman Brothers collapse, the 2013 U.S. Federal Reserve’s “Taper Tantrum” or after the 2016 U.S. election. The expectation of higher bond yields was at or close to all-time highs.
The top tail risks to the economy were thought to be problems with the vaccine rollout (30%), the Fed easing its asset purchases (29%), and a Wall Street bubble (18%).
Bitcoin hovered near $36,000 on Monday, below a level that strategists at JPMorgan Chase & Co. see as an inflection point for the digital coin.
The cryptocurrency could be hurt by an exodus of trend-following investors unless it can “break out” above $40,000 soon, a team including Nikolaos Panigirtzoglou said. The pattern of demand for Bitcoin futures and the $22.9 billion Grayscale Bitcoin Trust will help determine the outlook, they added.
“The flow into the Grayscale Bitcoin Trust would likely need to sustain its $100 million per day pace over the coming days and weeks for such a breakout to occur,” the strategists wrote in a note on Friday.
Traders seeking clues about investor appetite for risk have been gripped by Bitcoin’s stunning rally and turbulent 10% slide from a record of almost $42,000 on Jan. 8. The cryptocurrency boom since March has reflected the ebullience of financial markets awash in stimulus — as well as concern over whether gains will ultimately prove fleeting.
The JPMorgan strategists said Bitcoin was in a similar position in late November, except with $20,000 as the test. Flows of institutional investment into the Grayscale trust helped the world’s largest cryptocurrency extend its rally, they wrote.