The capacity for traditional market participants to make significant short bitcoin trades has been "enhanced significantly" by the approval of spot bitcoin ETFs, according to an analyst.

A spot bitcoin ETF, similar to a stock, can be shorted, enabling investors to capitalize on anticipated price declines by selling borrowed ETF shares. The process of shorting an ETF would involve borrowing shares from a broker, selling them at the current market price, and later repurchasing them at a lower price to return to the lender.

"This increased capacity to safely short bitcoin by traditional market participants is in part because the perceived risk of the share-borrow, and the collateral posted to support it, is now lower in the minds of these market participants, as …