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I thought I heard that hedge funds have a percentage of asset types they have to maintain and when one asset needs to be sold the % needs to be rebalanced. This means BTC has to be sold off in tandem with other assets.

I really forget the source of where I heard this and I think it was also back in 2022 with the other crashing and burning of Luna, Celsius, FTX etc.

Toby 2y ago

This is true. It’s known as the “denominator effect”.

This was also seen in the last ~6 months in the real estate markets as funds became over-concentrated in RE after equities fell over the last year

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Discussion

Steven Day 2y ago

Thank you for this. Been trying to do a search and find the name or characterization described.

Toby 2y ago

Glad I could help! And thanks for the zap! Feels great to provide the community some value as a lowly pleb

Steven Day 2y ago

We are all lowly plebs on this glorious Friday and sats are on sale!