Price volatility following a series of fake tweets from the U.S. Securities and Exchange Commission (SEC)’s X account caused nearly $90 million worth of bitcoin (BTC) long and short positions to be liquidated, showcasing manipulation risks associated with the industry.
Hackers gained control of the SEC’s X account on Tuesday, using it to post a nod for the much-awaited bitcoin exchange-traded fund (ETF) approval decision. It later posted “$BTC,” before both tweets were promptly deleted.
The impact of these tweets was significant, causing bitcoin prices to immediately spike to $47,680 from the $46,800 level before falling as low as $45,400 as the tweets were revealed to be fake. Punters and automated bots reacted quickly to the tweets, with over $500 million in futures positions opened in a ten-minute period following the initial post. However, the highly-leveraged positions suffered as prices whipsawed, with approximately $50 million in longs being liquidated while $36 million in shorts were impacted.
Understanding the concept of liquidation is crucial for traders, as it occurs when an exchange forcefully closes a trader’s leveraged position due to a partial or total loss of the trader’s initial margin. It happens when a trader is unable to meet the margin requirements for a leveraged position, resulting in the trade being closed.
Analyzing such data can provide traders with valuable insights, as it serves as a signal of leverage being effectively washed out from popular futures products and acts as a short-term indication of a decline in price volatility.
With a decision on thirteen proposed bitcoin ETFs expected on Wednesday, Bloomberg analysts have placed approval odds at over 90%, while crypto market bettors estimate a relatively smaller 85% chance of approval. This decision is highly anticipated and will likely have a significant impact on the crypto market.
In the aftermath of the fake tweets, some crypto market participants have criticized the SEC’s seemingly lax security measures to protect its account, questioning how the financial regulator could safeguard trillion-dollar markets if it couldn’t protect its social accounts. This incident highlights the importance of robust security measures within the crypto industry and the need for greater vigilance against potential manipulation threats.