Bitcoin traders seem to be exhibiting caution in the run-up to a critical decision on the horizon - the potential approval of the first Bitcoin exchange-traded fund (ETF) in the United States.
Despite Bitcoin's impressive 200% year-to-date growth, the market appears subdued as it approaches the 2023 candle close.
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Notably, Bitcoin's leverage metrics are nearing historic lows, particularly the Estimated Leverage Ratio (ELR), which is capturing attention. Analysts find this trend quite remarkable, with only two previous instances of such low ELR levels in Bitcoin's history.
This suggests a significant reduction in market leverage, indicating a conservative approach by futures market traders.
James Van Straten, a research and data analyst at CryptoSlate, emphasizes this, noting:
This pattern was observed during two critical periods: May 2021, amid China’s mining ban, and Nov. 2022, in the aftermath of the FTX collapse. On these occasions, Bitcoin’s value declined until it found a new local bottom. This recurring sequence suggests a correlation between ELR lows and Bitcoin market value adjustments.
The market sentiment regarding the ETF approval has shifted. While Bitcoin saw rapid gains fueled by excitement just last month, the current mood appears to be one of cautious anticipation, as reflected in the declining open interest in Bitcoin futures contracts, which is nearing year-to-date lows.
The decline in Bitcoin leverage and the diminishing interest in futures contracts contrast with the previous bullish sentiment surrounding the ETF approval.
Some had believed the odds of ETF success to be nearly certain, but the market now seems to be adopting a "wait and see" approach.
BitQuant, a prominent crypto analyst, expressed surprise at the fading enthusiasm around the ETF decision, stating:
The majority is not aware of Bitcoin ETF being accepted in 22 days, and the remaining minority doesn’t believe it will happen, even if Bitwise does a commercial on it.
However, others are pretty optimistic. Michael Saylor, co-founder of MicroStrategy and a prominent Bitcoin advocate, for example, believes that the approval of a spot Bitcoin ETF could mark one of the most significant developments on Wall Street since the early 1990s.
