As the price falls, interest grows—this best describes the latest developments in the Bitcoin market. Despite the asset dropping to a three-month low, major players, including hedge funds and governments, are taking advantage of the dip to increase their positions. Could this mark the beginning of a new trend rather than the end of the bull market?
Traders Are "Buying the Dip": Who Actually Benefits from the Decline?
As Bitcoin fell below $88,000, market participants began opening short positions on futures platforms like Binance. Open interest surged by $1 billion, a sign that many expect further declines.
However, an interesting shift is happening: on Kraken, traders massively increase long positions, pushing the long-to-short ratio to a record 0.8. This suggests that big players believe in an imminent trend reversal.
Why does this matter? A rise in long positions typically signals that the market is preparing for a rebound. However, the continued dominance of short positions indicates that confidence in a trend reversal is not yet overwhelming.
The Hidden Game of Major Players: Pressure or Opportunity?
Many investors see the current decline as a chance to enter the market at an attractive price. The increase in long positions on Kraken suggests that large players expect a recovery soon. However, the overall negative sentiment means that short-term declines are still risky, potentially trapping less experienced traders.
Interestingly, amid Nasdaq's weakness, traders increasingly use Bitcoin as a hedge against traditional market declines. However, uncertainty remains, and the stability of the Japanese yen against the U.S. dollar suggests a reduced global appetite for risk.
El Salvador and Metaplanet: Institutional Players Are Not Giving Up
While speculators anticipate further declines, strategic investors continue to increase their holdings. The government of El Salvador, one of the largest institutional holders of Bitcoin, has acquired an additional 7 BTC worth approximately $614,000, bringing its total reserves to 6,088 BTC.
This purchase came shortly after a temporary pause in the country's daily Bitcoin buying program, which began in November 2022. The recent pause sparked speculation about possible influence from the International Monetary Fund on El Salvador's policies. However, President Nayib Bukele dismissed these concerns, reaffirming the country's commitment to Bitcoin accumulation.
At the same time, Japanese company Metaplanet has expanded its holdings, purchasing 135 BTC worth $12.9 million. The company aims to reach 10,000 BTC by the end of 2025, making a long-term bet on Bitcoin's growth despite market volatility. CEO Simon Gerovich has expressed confidence in achieving a 35% quarterly return in 2025.
Hedge Funds, ETFs, and the Hidden Risk of a Drop
Arthur Hayes, co-founder of BitMEX, has warned that Bitcoin could drop to $70,000 due to increasing market pressure from hedge funds engaged in arbitrage strategies between ETFs and CME futures.
The mechanism is simple: hedge funds buy spot ETFs while simultaneously shorting Bitcoin futures. If the price gap between these instruments narrows, funds liquidate their positions, triggering additional market pressure. The primary risk is that hedge fund activity could amplify downward pressure on Bitcoin's price in the short term.
Recent reports indicate that most IBIT holders are hedge funds exploiting the price difference between Bitcoin futures and ETFs. This creates additional market pressure, which could intensify if the spread between these instruments continues to shrink.
Reversal or Continued Decline?
At first glance, the market appears bearish—rising short positions, hedge fund arbitrage strategies, and a declining risk appetite among global investors. However, active Bitcoin accumulation by governments and institutional investors could serve as a stabilizing factor.
From a technical perspective, Bitcoin remains at risk, with its future trajectory largely dependent on whether bulls can defend key support levels around $85,000. If hedge fund pressure continues to grow, Bitcoin's price could fall to $70,000, as Arthur Hayes predicts.
What's Next: Short-Term Risks vs. Long-Term Potential
Current volatility highlights significant short-term risks. If hedge funds intensify their selling pressure, Bitcoin could drop to $70,000 in the short term. However, institutional purchases by governments and major companies provide a strong foundation for future growth.
In the long term, if the "buy the dip" strategy continues to play out, Bitcoin could not only recover above $90,000 but also reach new all-time highs. The key question remains: Can retail investors and traders withstand the short-term volatility?
Conclusion
The current correction is not the end of the bull market, but rather an opportunity for strategic investors to strengthen their positions. Traders should closely monitor hedge fund activity and institutional moves from players like El Salvador and Metaplanet.
In the coming weeks, Bitcoin may see further declines, but fundamental factors point toward potential long-term growth.
For short-term traders, high volatility means they must carefully manage risk and liquidation levels. For long-term investors, this downturn could be a prime opportunity to accumulate, as past Bitcoin corrections have often preceded new all-time highs.
