The End of ETF Euphoria: Can Bitcoin Make a Comeback?

Amid the decline in the price of the first cryptocurrency, questions have emerged about whether cracks in momentum trades such as Bitcoin indicate a stricter outlook for risk appetite as the prospect of higher interest rates for longer looms over financial markets. Austin Reid, global head of revenue and business at FalconX, believes the crypto market is only temporarily uncertain. A slowdown in demand for spot Bitcoin ETFs could be one of the best measures to reduce interest.

Matthew O’Neill, co-director of research at Financial Technology Partners, believes the approval of spot Bitcoin ETFs in January sparked euphoria in the market, followed by a natural price correction after the rally. The expert notes that ETFs attracted an outpouring of interest from professional investors who wanted exposure to Bitcoin but only wanted to buy the cryptocurrency through institutional means. O’Neill sees the current decline in BTC as an excellent time to buy before the subsequent increase in Bitcoin prices.

The expert believes miners began selling off BTC to upgrade equipment since old devices are no longer profitable. The cryptocurrency market may enter a bearish phase if it falls below this level. According to CoinShares data, investors poured about $2.6 billion into Bitcoin ETFs in the second quarter, up from about $13 billion in the first three months of the year.

After a steady outflow of funds, spot Bitcoin ETFs again showed positive dynamics at the end of June. The trend reversal occurs against the backdrop of general instability in the market for cryptocurrency investment products. CoinShares said over $1 billion was withdrawn from the sector over the previous two weeks.

However, most of the attention is now focused on the Ethereum ETF. These investments triggered a sharp rise in the price of BTC: according to the company, every $1 billion in inflows increased the value of Bitcoin by 6%. Experts from the analytical company CryptoQuant said they expect positive movements in the cryptocurrency market in the third quarter of 2024.

Analysts explained that the upward rally would continue again if miners completed the sale of BTC. CryptoQuant also added that the crypto market has been falling recently because of the miners. After the halving, the profitability of their activities fell, and they were forced to sell off their assets.

Because of this, miners’ activity decreased, and they began to sell Bitcoin on over-the-counter markets to cover mining costs. The investor noted that risky assets like BTC usually rally against the backdrop of the U.S. presidential election. Thus, experts maintain a bullish forecast for Bitcoin’s medium-term trend.

However, growth slowed down as part of a local downward correction.

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