[Analysis] “ETFs and short covering drove Bitcoin’s rebound…on-chain indicators are mixed”

An analysis suggests that the recent rebound in Bitcoin (BTC) prices has been driven by U.S.-listed exchange-traded funds (ETFs) and “short covering (buying to close sell positions that bet on declines).”

A CryptoQuant contributor from XWIN Research Japan said via CryptoQuant on the 5th (local time) that “Bitcoin prices rebounded sharply in early this month, recovering the $73,000 level,” adding that “one of the key factors behind this rebound was renewed inflows into U.S. spot Bitcoin ETFs.” XWIN Research Japan noted that “hundreds of millions of dollars flowed into multiple ETFs in early this month, directly underpinning spot demand,” and that “more than $200 million flowed in on the 4th alone, showing that institutional investor participation is strengthening again.”

XWIN Research Japan also pointed out that “the derivatives market played an important role.” The contributor said that “open interest (OI) surged while funding rates turned negative, signaling that short positions had become crowded,” and analyzed that “as Bitcoin prices rose, a chain of short liquidations occurred, forming a short-covering rally that further amplified the upside.”

However, the assessment is that on-chain indicators are not yet pointing to a clear direction. XWIN Research Japan noted that the 90-day “Realized Profit/Loss Ratio” “remains below 1.0,” and that “the share of coins in an unrealized loss position has also increased.” It added that “on the other hand, there are positive signals as well, such as the Coinbase Premium Index turning positive recently after an extended period in negative territory, suggesting a potential recovery in spot demand from U.S. investors.”

The contributor stressed that “geopolitical uncertainty remains a key variable,” adding that “during periods of escalating global tensions, Bitcoin shows characteristics of being a risk asset while also being used as a means for capital movement and wealth preservation.”