Bitcoin: Correction Could Be Nearing End as New ETFs See Massive Fund Inflows

The launch of the first batch of Spot Bitcoin ETFs last month was received as a sell-the-news event by (Bitcoin) traders, causing a pullback in prices to around the $38,000 support area.

However, despite the increased selling pressure, the fundamental outlook for the year still suggests a continuation of the upward trajectory, driven by factors such as the upcoming halving, the Federal Reserve's interest rate cuts, and the influx of funds into these ETFs.

Bitcoin ETFs are gaining significant popularity, with inflows reaching an impressive $30 billion within this short period.

iShares Bitcoin Trust (NASDAQ:IBIT) currently leads in trading volume, generating $303.97 million per day at its peak last week, surpassing the previous leader GBTC Grayscale.

The trend indicates that the influx of funds into Bitcoin ETFs will likely persist, supporting the overall valuation of Bitcoin.

Notably, ETFs now hold around 3% of all Bitcoin, according to information from NASDAQ. If this pace continues, it could lead to double-digit ownership percentages by the middle of the year.

Strong US Data Poses Headwinds for Bitcoin

While Bitcoin was initially designed as a deflationary alternative to gold, its high volatility has placed it closer to risky assets.

Hence, the Federal Reserve's policy becomes crucial for Bitcoin's valuation. Although interest rate cuts are expected this year, the timing of the pivot remains uncertain.

Recent strong economic data and hawkish signals from the Fed suggest potential cuts around the middle of the year.

In the short term, a continued restrictive monetary policy by the US authorities may limit price increases.

However, in the longer term, an inevitable series of interest rate reductions favors market bulls.

Key economic data, particularly related to economic dynamics and the labor market, will play a crucial role. Any noticeable slowdown could convince the Fed to initiate a pivot.

Technical View: Triangle Breakout Could Have Legs

The recent bounce off the $38,000 support signals a potential end to the unwinding phase, with a return to the broader uptrend.

Confirmation of this development would come from an upward breakout from the local triangle formation, potentially setting the stage for a retest of recent highs around $49,000.

A break to the downside will also be an important signal, which may suggest that it is still too early to return to the trend. The key defense level for the demand side in this case remains $38k.

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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple points of view and is highly risky and therefore, any investment decision and the associated risk remains with the investor.