Did Omicron Or A Bitcoin Futures Short Last Week Trigger A Weekend Selloff?PARIS, FRANCE - FEBRUARY 16: In this photo illustration, a visual representation of digital ... [+] cryptocurrencies, Bitcoin, Ripple, Ethernum, Dash, Monero and Litecoin is displayed on February 16, 2018 in Paris, France. Digital cryptocurrencies have seen unprecedented growth in 2017, despite remaining extremely volatile. (Photo Illustration by Chesnot/Getty Images)

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A crypto flash-crash on Saturday attributed to Omicron uncertainty, fears of further Fed tapering, and a $500 million bitcoin sale that triggered cascading liquidations caused bitcoin to reach a low of $42,330, while ether dipped to $3,575 before both currencies partially recovered – they are presently trading at $51,500 and $4,358, respectively.

There were some warning signals. For instance, in a piece published two days before the drop in prices, a Forbes analysis of Commodity Futures Trading Commission (CFTC) weekly detailed how wealthy retail traders took out a heavy short position collectively worth $500 million at the same time Omicron was capturing headlines. The notional sum of this bet was not sufficiently large to move tens of billions of dollar’s worth of bitcoin daily trading volume, but it was an indicator of the overall negative sentiment going into the weekend and its notorious thin liquidity.

That said, these traders did not exactly profit from the weekend’s fall in prices.

The latest CFTC Commitments of Traders (COT) report released on Sunday confirms that the retail traders in the big-short story ultimately lacked bearish conviction - the abnormally large retail short positions closed by Tuesday November 30. Retail traders placed their short while bitcoin was in the $56,000 to $60,500 range and closed it somewhere within the $53,000 to $59,000 range, meaning that they could have earned a small profit. This bet’s short timeframe is in line with a slightly longer one seen in October when this same group initiated a large buy (long) bitcoin position. These traders appear to follow an agnostic long/short trading approach, lasting one to two weeks. This contrasts for example with asset managers who these days are long-only.

Total bitcoin futures open interest held by retail traders at the CME Exchange, in number of ... [+] contracts