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Bitcoin ETF Launch Triggers $230 Million in Liquidation Losses

Bitcoin ETF Debut Sparks Volatility With Traders Losing $230 Million Amid Price Whipsaw

Jan 12, 2024
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The introduction of Bitcoin ETFs in the U.S. brings unexpected turbulence, impacting both long and short positions as prices experience a rollercoaster ride.

The introduction of Bitcoin exchange-traded funds (ETFs) in the U.S. market didn’t result in the anticipated sell-off event. However, it did influence both long and short Bitcoin futures positions, affecting approximately $80 million as prices soared and then plummeted.

Bitcoin prices surged to over $49,000 shortly after the inaugural ETFs began trading. This sudden increase sparked a wave of optimism and leveraged positions. Consequently, major cryptocurrencies like Ether (ETH) and Solana’s SOL experienced a price surge of up to 10% within a few hours.

However, the initial excitement faded, and Bitcoin took a downturn. Market analysts suggested that the substantial trading volumes generated by Grayscale’s Bitcoin ETF were likely due to sellers. Bitcoin prices dropped to around $45,700, the same level before the ETFs commenced trading, and have not surpassed the $47,000 threshold since late Thursday.

The Grayscale Bitcoin ETF, an upgraded version of the now obsolete Grayscale Bitcoin trust product, held a specific amount of spot Bitcoin per share and traded at a discount to the value of its holdings throughout 2023. This erratic price movement led to the liquidation of both long and short Bitcoin futures traders amidst the volatile price action. Nearly $40 million worth of Bitcoin was affected in each direction, totaling $83 million, with the majority occurring on the cryptocurrency exchange Binance.

A downturn in Bitcoin triggered a similar trend in other futures products, leading to over $230 million in liquidation losses. This means traders incurred substantial losses even though the overall market remained relatively stable over the past 24 hours.

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