The Misjudgment of Wall Street's "Wolves"
Wall Street's elite traders, often likened to the cunning "wolves" of finance, appear to have misread the market once again.
According to the latest monthly survey from Bank of America Global Research (BofA), 43% of fund managers polled in May identified "long Bitcoin" as the most crowded trade, a significant jump from April's 27%.
April's top pick—"long tech stocks"—dropped to second place in May. Other notable contenders included long ESG, short US Treasuries, and long infrastructure.
But is this assessment accurate?
Why Wall Street Got It Wrong
Financial blog ZeroHedge suggests that Wall Street professionals may have labeled "long Bitcoin" as the most crowded trade due to the recent price surge driven by both whales and retail investors.
However, the blog argues that "long Bitcoin" is far from the most crowded trade. The reasoning?
- Limited Exposure: Wall Street's capacity to take long or short positions in Bitcoin is constrained by the scarcity of tradable assets. Compared to other highly saturated positions, Bitcoin's actual risk exposure remains minimal.
- Regulatory Barriers: Most firms are prohibited from holding Bitcoin directly. A handful trade Bitcoin futures, while the Grayscale Bitcoin Trust (GBTC)—the largest Bitcoin fund—serves as the primary vehicle for institutional bets.
- Buy-Side Caution: Aside from a few high-profile investors, most large funds are either观望 (on the sidelines) or just beginning to dip their toes into crypto.
The Practical Reality
At ~$43,000 per Bitcoin, its market cap exceeds $800 billion. Yet GBTC's market value stands at just $23.8 billion—less than 3% of Bitcoin's total value.
In other words: Wall Street lacks the traditional tools to execute large-scale Bitcoin investments.
Why the Misconception?
ZeroHedge notes that BofA's survey might hold some signaling value. Traders first (and incorrectly) flagged "long Bitcoin" as overcrowded in December 2017—one month before its infamous crash.
Back then, the rally was fueled by retail and Asian speculative capital. This time, institutions are gradually entering the fray.
Notably, in January 2021, Wall Street also temporarily deemed Bitcoin the most crowded trade before swiftly reverting to "long tech stocks." Meanwhile, Bitcoin quietly doubled in price, hitting new highs month after month.
FAQs
Q1: What defines a "crowded trade"?
A: A crowded trade occurs when an overwhelming majority of investors hold similar positions, increasing volatility and liquidation risks.
Q2: Why can’t Wall Street heavily invest in Bitcoin?
A: Regulatory restrictions limit direct ownership, while derivatives and GBTC offer only fractional exposure.
Q3: Is Bitcoin’s current rally sustainable?
A: While institutional participation adds stability, the market remains speculative. Historical patterns suggest caution.
👉 Discover how institutional crypto adoption is reshaping markets
👉 Why GBTC’s premium fluctuates—and what it means for investors
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