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Bitcoin’s Rebound After a Geopolitical Shock: ETF Inflows and Short Covering Reveal a Market in Transition (Analysis Report No.225)
From late January to early March 2026, Bitcoin experienced notable volatility. After falling to the mid-$60,000 range, BTC rebounded sharply in early March and recovered to around $73,000. This report examines the rebound through price action, on-chain indicators, derivatives activity, ETF flows, and macro developments. The immediate trigger for the decline was geopolitical tension. On February 28, reports of a U.S.–Israel military strike on Iran heightened tensions in the Middle East. Bitcoin dropped to roughly $63,000 on February 29. However, the market quickly stabilized. By March 2, BTC had recovered near $70,000, and strong buying pressure between March 4 and 5 pushed the price above $73,000. One of the main drivers behind this rebound was renewed inflows into U.S. spot Bitcoin ETFs. In early March, several hundred million dollars entered these funds, directly supporting spot demand. On March 4 alone, inflows surpassed $200 million, highlighting renewed institutional participation. Derivatives markets also played a critical role. Open Interest rose sharply while funding rates moved into negative territory, signaling crowded short positioning. As prices increased, short liquidations triggered waves of short covering that amplified the rally. On-chain data shows a mixed structure. Bearish signals include the 90-day Realized Profit/Loss Ratio remaining below 1.0 and an increase in coins held at unrealized losses. However, constructive signs are also emerging. The Coinbase Premium Index recently returned to positive territory after an extended negative period, suggesting renewed spot demand from U.S. investors. Geopolitical uncertainty remains a key theme. During periods of global tension, Bitcoin is increasingly viewed not only as a risk asset but also as a crisis asset used for capital mobility and wealth preservation. Overall, the rebound toward $73,000 appears largely driven by ETF inflows and derivatives-driven short covering.