Trading on Bitcoin ETFs causes high liquidations on futures.

Yesterday, the long-awaited debut of the first Bitcoin exchange-traded fund in the United States took place, which ended with mixed results, also causing losses for futures traders.

On one hand, the volumes recorded by large fund managers such as Grayscale, BlackRock, and Fidelity have reached record numbers, while on the other hand, many futures market traders have encountered heavy liquidations.

In particular, market volatility induced by the start of trading for the spot ETF has led to the liquidation of many positions, both short and long, for a total of 80 million dollars.

The BTC price has skyrocketed to nearly $49,000 at the opening of the American stock exchanges, but then experienced a downturn that reached a low of $45,600.

Overall, was the launch of the ETF a success or a failure? What will happen in the next few days?

Let’s see all the answers in the article.

Bitcoin: excellent market volumes for the first day of trading of the spot ETF on US exchanges

After months and months of delays by the SEC, various Bitcoin spot ETFs were finally launched on US exchanges, achieving excellent numbers in terms of public participation.

In total, as highlighted by Bloomberg analyst James Seyffart, a whopping $4.6 billion has been traded on the various funds presented by the 11 fund managers who received approval from the federal securities commission the previous day.

Note how the Grayscale ETF alone accounted for almost half of all volumes, with $2.2 billion in trades.

Following, we find the Ishares Bitcoin Trust (IBIT) ETF by Blackrock which managed just over 1 billion dollars in operations, accounting for 22% of all trades of the day.

On the last step of the podium we see instead the Wise Origin Bitcoin Fund by Fidelity which had transactions for 700 million dollars.

Many have pointed out how the BTC ETF by Hashdex, last in terms of total volumes, did not actually start trading the spot fund yesterday, but continued with its investment vehicle underlying futures.

Although, in fact, the SEC has approved Hashdex’s 19b-4 filing, which would allow its spot ETF product to be listed on US exchanges, the same agency has not drafted the actual S-1 form.

Hashdex commented on the matter, emphasizing that the fund did not yet hold any Bitcoin and that in the coming days we will instead see the actual debut of the ETF.

Overall, the launch of the first regulated Bitcoin investment tool in the USA has been a great success: no other ETF debut had reached a total volume of 4.6 billion dollars.

This reflects the interest and attention that American investors reflect on the world of cryptocurrencies, which have always been very attractive due to their potential return on investment but belonged (until recently) to a context that was not very transparent and lacked rules.

Regarding the praise for the volumes reached yesterday, it is important to remember that a large part of the trading activity for GBTC (Grayscale’s fund) was being sold as investors moved from the fund to newer products with lower fees, such as BlackRock and Fidelity’s respective ETFs.

This means that, as theorized by Eric Balchunas, senior ETF analyst at Bloomberg, part of the total volume was only “fictitious”, created only for the purpose of “transition” from Grayscale’s trust to a traded fund on the NYSE.

Futures traders liquidated for $80 million and Bitcoin (BTC) price drop

Setting aside the issue of the first day’s volumes, which will be supplemented with data from the coming days, let’s observe another effect produced by the launch of the new Bitcoin exchange-traded funds.

It is very interesting to note that, contrary to what many expected, the debut of spot ETFs materialized in a sell the news for the cryptocurrency.

Despite the slight retracement after the first hour of the opening of the American markets, Bitcoin closed the day at $46,600, even holding the 5-period exponential moving average on the daily time frame.

This does not exclude potential trend reversals and the beginning of a bearish season (the sell the news could materialize in a medium-term perspective), but it still disproves various theories that predicted a significant dump on the occasion of the debut of Bitcoin ETFs.

However, what is much more interesting is the effect caused on the derivatives market cryptocurrencies derivatives front.

As highlighted by the analysis platform Coinglass, over 80 million dollars of open positions on Bitcoin futures were liquidated yesterday, with 34 million dollars being liquidated on Binance alone.

There has not been a unilateral liquidation of traders positioned solely on the upside or downside, but rather an event that triggered “margin calls” for both bears and bulls: long and short liquidations are approximately equivalent.

More specifically, most positions were liquidated between 15:30 and 17:00, with shorts losing their capital during the BTC rally in the first half hour, and longs following in the next hour.

The volatility on both sides of the chart was the catalyst that led to the liquidation of many traders who were operating in the futures market yesterday.

Counting also the other cryptocurrencies besides bitcoin, the numbers rise to about 230 million dollars.

Overall, as confirmed in the previous paragraph, the debut of the spot ETF has been positive: despite the observed liquidations yesterday not being negligible, we can still confirm that they have been lower or in line with those recorded on January 3rd, 8th, 9th, and 10th.

The numbers, moreover, have not been so scary as to induce fear in crypto investors.

As for the BTC price action, there are currently many scenarios open that will more or less materialize in the coming days.

The optimism generated by the ETF will definitely bring its benefits in the long term, elevating the asset to a significantly more important level for the traditional finance world. 

However, let’s not forget at the same time that we have had 15 months of uninterrupted increases, with BTC closing 2023 with a 140% rise: a downturn at this moment would not be so unlikely.