Bitcoin ETF hype drove futures market to fever pitch before correction
![](https://cryptonewswire.org/wp-content/uploads/2024/01/perps.png)
Quick Take
Between Oct. 2023 and Jan. 2024, Bitcoin’s market saw significant price appreciation, heavily influenced by anticipation around the approval of a Bitcoin spot ETF. The market’s spot prices surged from roughly $25,000 to $45,000. This potential catalyst for institutional adoption was predicted to enhance the digital assets market’s liquidity and maturity. Meanwhile, the futures market painted a picture of bullish confidence.
The futures’ annualized rolling basis, a metric for the yield from buying spot and selling futures, climbed to an impressive 20%. This beat the enthusiasm seen during the Nov. 2021 bull run and indicated traders’ positioning for further market gains. However, this bullish sentiment spilled into overdrive, overheating the derivatives market.
![Futures Annualised Rolling Basis (3M): (Source: Glassnode)](https://cryptoslate.com/wp-content/uploads/2024/01/ann.png)
This was evident as the perpetual funding rates on futures contracts hit unusually high levels, indicating a market skewed towards buyers. This over-leverage found its tipping point when Bitcoin experienced a sharp correction, crashing from $45,000 to $40,000.
![Futures Perpetual Funding Rate: (Source: Glassnode)](https://cryptoslate.com/wp-content/uploads/2024/01/perps.png)
This triggered the largest long liquidation event in a year, a discernable sign of the rapid unwinding of leveraged positions and the market’s susceptibility to sentiment shifts.
This period was marked by rampant speculations fueled by ETF optimism, which caused a highly leveraged market.
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