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During the trading week ending August 21, Bitcoin rallied as the White House renewed its push for passage of the Clarity Act. That bounce implied that this week would be a test for the durability of Bitcoin’s rebound – and the leading cryptocurrency is passing in strong fashion.
For the seven days ending midday Thursday, August 27, Bitcoin notched an 11% gain and was hovering above $80,200. Those may be signs that a new bull market is afoot. If that’s the case, then aggressive traders may want to evaluate geared ETFs, such as the Direxion Daily Bitcoin Bull 2X ETF (BTCU).
A relatively new addition to Direxion’s expansive suite of leveraged ETFs, BTCU came to market in May and is designed to deliver 200% of the daily returns of a bellwether, plain vanilla spot Bitcoin ETF. So BTCU is easy to understand, but it’s still worth remembering that this is a leveraged ETF. With Bitcoin’s well-documented reputation for big moves in both directions, BTCU should be treated as a short-term trading vehicle, not a long-term holding.
Encouraging Signs
For traders considering BTCU over the near-term, it’s also worth noting that some experts believe that the seeds of a new Bitcoin bull market are being planted.
“Bitfire Research finds that the move shows some characteristics of an early bull market, including a sharp reversal from lower levels, a rapid recovery and continued consolidation near previous highs without a clear breakdown,” said Allen Ding, director of research at Bitfire.
Ding also noted that for the moment, Bitcoin ebullience should be tempered because confirmation of a new bull market hasn’t arrived. Also, much of the rally seen during the week of August 21 was the result of short covering. However, that week brought the largest inflows in 10 months to spot Bitcoin ETFs, indicating renewed institutional enthusiasm for the digital currency and some vibrancy in the spot market. Those are two factors that could bode well for BTCU.
“The key question now is whether spot demand can take over. Spot Bitcoin ETF flows, continued institutional allocations and whether the Coinbase premium turns positive again will be important indicators to watch.Recent spot Bitcoin ETF inflows totalled approximately $1.92 billion, while large-scale short liquidations accelerated the rally,” added Ding.
While the Bitfire expert didn’t mention BTCU directly, traders considering the Direxion ETF may want to take their clues from the spot market.
“The immediate test is whether spot demand can replace short-covering as the market’s mainress and capital rotation continue to reinforce one another, the current move could mark more than a short squeeze — it could be the beginning of a new market cycle,” concluded Ding
For more news, information, and analysis, visit the Leveraged & Inverse Content Hub.
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