Which Traders Took the Hardest Hit from Bitcoin’s Fake ETF Rally?

The recent fake news around a spot Bitcoin ETF approval caused significant volatility in the crypto markets, leading to losses mainly for short-term Bitcoin traders.

Yesterday, false reports circulated that the SEC had approved BlackRock’s application for a spot Bitcoin ETF. This news caused the price of Bitcoin to surge rapidly from around $27,900 to over $30,000 within minutes. However, as BlackRock later clarified that these reports were bogus, Bitcoin’s price cratered back down to pre-news levels.

This enormous volatility was a boon for options traders betting on wider price swings. Bitcoin’s implied volatility shot up across short and intermediate-term options, with ultra short-term IVs spiking nearly 20%. Volume surged in short-dated call options at strikes between $28,000 to $30,000.

But this rollercoaster proved damaging for traders with shorter horizons who had bought Bitcoin around $27,900. The rapid rally liquidated nearly $100 million worth of short positions, forcing futures traders to cover high losses. Day traders were similarly whipsawed as Bitcoin gained and lost thousands within a span of minutes.

By contrast, longer-term Bitcoin holders were relatively unaffected. Implied volatility on options expiring by year-end barely budged, indicating institutional traders saw this as just short-term noise. Ether options were also unchanged, showing altcoin markets ignored the fake ETF news.

In the end, the Bitcoin spot ETF hype mostly burned traders focused on speculative short-term moves. But Bitcoin’s underlying fundamentals remain unchanged, with its limited supply still attractive for long-term investors. This episode highlights the risks of trading on unconfirmed rumors in crypto’s volatile markets.

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Petar Jovanović
Petar Jovanović

As the Head of Content at Captainaltcoin, I bring years of experience in the crypto industry. With a strong belief in the potential of the web3 market since 2017, I'm passionate about sharing valuable insights and knowledge. Feel free to connect with me on LinkedIn and let's discuss the exciting world of cryptocurrencies and decentralized technologies!