SEC’s tweet fiasco wipes out Bitcoin shorts with $17m lost in minutes

An erroneous social media post via the SEC’s X account briefly sent Bitcoin to fresh yearly highs before plunging again.
Traders were blindsided, and the moves give a hint about investor positioning.

Securities and Exchange Commission Chair Gary Gensler was quick to dash hopes of crypto users on Tuesday, after saying that his agency had not approved a US spot Bitcoin ETF.

Bitcoin soared following what the SEC called an “unauthorised” post on social media that claimed ETFs won approval.

Tuesday’s event gives a preview into the trading sentiment and positioning.

Market swings

Across major exchanges Bybit, Binance, and OKX, Bitcoin’s futures markets have witnessed a roughly $17 million washout in short positions over the last 24 hours, according to Velo data.

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While that amount is relatively small when compared to this week’s trade activity, the sudden losses highlight traders’ positioning in the volatile crypto market, Sam Holman, derivatives analyst at Australian trading firm Zerocap told DL News.

”We saw the pre-event narrative around the potential of a ‘buy the rumour, sell the news’ phenomenon play out,” he said. “You see the impact of the sell-the-news outcome playing out now in overall sentiment, with Bitcoin failing to recover the pre-false news.”

The social media debacle is unlikely to have any impact on the SEC’s view, he added.

On Monday, traders betting against upward moves in Bitcoin’s price were forced to concede more than $90 million following the asset’s initial punch beyond $46,000.

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Tuesday saw big swings, with Bitcoin reaching almost $48,000 before falling to about $45,000.

Coinciding with those moves, there are signs that traders are betting on an ETF greenlight.

Funding rates in Bitcoin’s perpetuals markets have been elevated since October, revealing a growing trend among long traders that they’re paying more to maintain their positions, Coinglass data shows.

An approval on any number of applications awaiting approval would likely see increasing inflows of capital to crypto, experts have told DL News.

The SEC is expected to provide its answer in the coming days.

Crypto market movers

Bitcoin slipped 1.8%to $46,000, after reaching a peak of $47,900 — its highest point in two years.
Ethereum remains largely unaffected. Up half a percent, the asset reached $2,300.

What we’re reading

‘First of its kind’ 79-page DeFi report signals shift in CFTC focus — DL News
Polygon And Fox Introduce ‘Verify’ For Media Authentication — Milk Road
Why Spot Bitcoin ETFs Are Likely to Finally Start Trading on Thursday — Unchained
U.S. DEA Probes Online Opioid Market’s $450M Crypto Flows — Milk Road
Inside the crypto war rooms where sleuths probed $91m in hacks the first week of the year — DL News

Sebastian Sinclair is a Markets Correspondent at DL News. Got a tip? Reach out at sebastian@dlnews.com