Bitcoin: After the euphoria of ETFs, a big correction to come?

Bitcoin has had some big moments lately. With the craze around spot ETFs, the attraction for digital currency has grown. However, could this euphoria herald a big correction?

The growing attraction of Bitcoin Spot ETFs

The appearance of spot ETFs has created a new vector of exposure to Bitcoin. Rather than purchasing cryptocurrency directly, many investors have sought to increase their exposure through these financial instruments.

This trend has been evident: the indicator Fund Holdings recently reached its highest level in two months. The rise reflects renewed investor confidence, spurred in part by fake news. Now, bitcoin is stabilizing around $34,000, according to figures from CoinMarketCap.

The appeal of ETFs is explained by the ease of investment they offer. Unlike direct investments where the investor owns the Bitcoin, ETFs pool the money of several investors to buy and sell the asset.

So, even without direct exposure, they can benefit from the valuation of the underlying asset. However, this method of investment is not without risk.

The announcement from BlackRock, the world’s largest asset manager, regarding a request for a Bitcoin ETF for its American clients, has sparked some excitement. However, SEC approval delays dampened this enthusiasm, leading to a notable drop in the index.

Volatility persists in the derivatives market

Optimism around Bitcoin has also been evident in the derivatives market.

Open interest in Bitcoin futures has surged, reaching its highest level since the May 2022 market turmoil.

However, an unexpected observation arose: the number of Bitcoin short positions exceeded longs in the last few hours of trading. This trend could suggest that some traders are anticipating a decline in the price of BTC in the near future.

Bitcoin-Long/Short. Source: Coinglass

The history of Bitcoin is full of ups and downs. If the enthusiasm around ETFs has restored confidence to certain investors, caution remains in order. Markets are influenced by a multitude of factors, and Bitcoin is no exception.

The question remains: is this euphoria around ETFs the prelude to a big correction? Only time will tell, but one thing is certain, Bitcoin’s journey continues to attract worldwide attention. For some, the rise has already started.

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