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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