Why Bearish Bets and ETF Flows Trigger a Rally
Main Receptors:
Bitcoin hitting $72,000 would wipe out $2.5 billion worth of shorts, potentially breaking the bearish streak.
The Iran war and high oil prices are putting pressure on BTC right now, but a ceasefire or ETF outflows could spark a quick recovery.
If BTC reaches $72,000, $2.5 billion shorts are at risk
After attempting to reclaim the $75,000 level since March 17, Bitcoin (BTC) has failed to reach new highs in a row.
Bearish Bitcoin futures bets have been piling up since June 2022, with the war in Iran sending oil prices to record highs. But two events could propel Bitcoin to $72,000 in the coming weeks and fuel a sustained bull run.
According to Coinglass estimates, if Bitcoin were to rise 7.5% from its current level of $67,100 to $72,000, a total of $2.5 billion would be lost in short positions in Bitcoin futures.
BTC bears benefit from miners' selling, weak S&P 500
Since March 25, Iran has refused to sign a cease-fire agreement, and the bears are adding shorts. Further selling pressure came as MARA Holdings (MARA US) announced it had sold 15,133 BTC on March 26. The publicly listed Bitcoin miner chose to reduce his Bitcoin holdings to pay off his debt, turning his attention to AI computing.
After nearing 7,000 points on January 28, the S&P 500 was down 10% on March 30. Investors fear the risk of recession because central banks have little room to cut interest rates due to inflation.
Oil prices have risen more than 70% since Iran's war began in late February, raising logistics costs and reducing consumer spending.
Traders are betting on an 89 percent chance that the Fed will keep interest rates on hold until September, with a 5 percent chance of a 4 percent hike.
In early March, bond futures showed the opposite, with 79% downside odds. Returns on fixed income investments remain attractive over the long term.
Meanwhile, confidence among Bitcoin bears has increased, as reflected by negative funding levels in perpetual futures contracts.
In neutral market conditions, it pays to hold vacancies for a long time, allowing an applicant to have between 5% and 10% to offset capital costs.
Negative funding rates indicate a lack of appetite for bullish bets and overconfidence from bears.
A ceasefire or economic weakness could boost Bitcoin.
While the outcome of a war with Iran is impossible to predict, a cease-fire agreement could create a sensation and catch bears off guard.
Bitcoin jumped from $69,150 to $74,900 in the five days ending March 16, after US-listed Bitcoin exchange-traded funds saw $1.5 billion in net inflows in two weeks. If ETF gains continue, Bitcoin could regain the $72,000 level.
Related: Bitcoin ETFs ‘Outperform' Gold ETFs–Analyst
US President Donald Trump has asked Congress to increase defense spending to $1.5 trillion in his 2027 budget proposal released Friday. These plans include a 10% reduction in other areas to offset military spending.
“We're fighting a war, we can't take care of day care,” Trump said at a private event at the White House on Wednesday, CNBC reported.
If the U.S. economy loses steam, or if personal loan defaults continue to weigh on the market, investors may look for alternative hedges.
Thus, Bitcoin's appeal increases as it currently trades 47 percent below its all-time high. So, no matter how long the war in Iran lasts, a bull run to $72,000 is likely to occur.
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