False Bitcoin ETF Approval Tweet Sparks $90 Million in Liquidations

False Bitcoin ETF Approval Tweet Sparks $90 Million in Liquidations

10th Jan, 2024

A surge in Bitcoin prices was triggered by a series of fabricated tweets posted from the U.S. Securities and Exchange Commission (SEC)’s compromised X account. The tweets falsely endorsed the anticipated approval of a Bitcoin exchange-traded fund (ETF) and were swiftly followed by a " $BTC" post, both of which were promptly deleted. Bitcoin prices quickly rose from $46,800 to $47,680, only to plummet to $45,400 as the tweets were exposed as fraudulent.

The incident led to substantial market volatility and approximately $90 million in Bitcoin long and short positions being liquidated. Automated bots and traders reacted promptly, resulting in the opening of over $500 million in futures positions within a ten-minute period. However, the highly-leveraged positions suffered losses, with approximately $50 million in longs and $36 million in shorts being liquidated.

Liquidation occurs when an exchange forcibly closes a trader’s leveraged position due to a partial or total loss of the initial margin, typically when the trader cannot meet the margin requirements. The data on liquidations can signal the effective reduction of leverage in popular futures products, serving as a short-term indication of declining price volatility.

As the cryptocurrency community awaits a decision on thirteen proposed Bitcoin ETFs, scheduled for Wednesday, Bloomberg analysts estimate approval odds at over 90%, while market participants are slightly more conservative at 85%.

Criticism arose regarding the apparent lax security measures of the SEC's social media account, questioning how the financial regulator could safeguard trillion-dollar markets if it couldn't protect its own online presence.


Felix @mecnix

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