Bitcoin open interest records massive carnage, over $1 billion wiped out on false reports over spot BTC ETF

Bitcoin price recorded a 10% surge on false reports that iShares Spot BTC ETF application had been approved.
While the news proved false, the uptick saw almost $80 million in short positions liquidated against only $18 million longs.
Over $1 billion in aggregated open interest was wiped out along with the liquidated shorts.
The reaction could be a preview of how the market could receive an actual nod from the commission.

Bitcoin (BTC) open interest has recorded massive destruction after false reports claimed that the US Securities an Exchange Commission (SEC) had approved a BlackRock iShares BTC Sot ETF.

Also Read: Bitcoin could dip below $20,000 soon if spot ETF is not approved

Bitcoin responds to false Spot BTC ETF reports

Bitcoin (BTC) price peaked after a 10% rally during the early hours of the New York session, following news that the US SEC had approved the iShares Spot BTC ETF. The surge proved short-lived, however, on the back of confirmation that the news was false.

I believe this to be fake news.

While this would be positive for the things we've been saying. I can't find anything that would confirm this at the moment. #Bitcoin https://t.co/gVGGUsBfga
— James Seyffart (@JSeyff) October 16, 2023

Despite confirmation, the damage was already done for perpetual traders that had opened short positions. Data from Coinglass shows that almost $80 million in short positions were liquidated, alongside around $18 million longs.

BTC liquidations.

While the shorts suffered, the broader market also saw over $1 billion in aggregated open interest – or open positions – wiped out due to the false reports.

BTC Open Interest

The reaction could be a presage of the kind of carnage that could occur if the US SEC actually gives a nod to the Spot BTC ETF filings it is currently deliberating over. The false rumor trampolined Bitcoin price into the $28,000 range, with the Relative Strength Index (RSI) holding above the 50 level.

The extra-long daily candlewick higher caused by the false speculation looks very much like an ‘exhaustion bar’ which could actually presage a reversal in the short-term uptrend and more downside to come., Bitcoin price could lose all the ground covered on October 16, potentially going below the support provided by the ascending trendline to tag the $26,000 psychological level. A break below the trendline would provide confirmation of even deeper losses.

Only a daily candlestick close above the $29,747 resistance level would reconfirm the uptrend, clearing the path for a potential extension into the $30,000 psychological zone. In a highly bullish case, BTC price could clear the July peaks by tagging the $31,804 range high. Such a move would constitute a 15% climb above current levels.

BTC/USDT 1-day chart

Open Interest, funding rate FAQs

How does Open Interest affect cryptocurrency prices?

Higher Open Interest is associated with higher liquidity and new capital inflow to the market. This is considered the equivalent of increase in efficiency and the ongoing trend continues. When Open Interest decreases, it is considered a sign of liquidation in the market, investors are leaving and the overall demand for an asset is on a decline, fueling a bearish sentiment among investors.

How does Funding rate affect cryptocurrency prices?

Funding fees bridge the difference between spot prices and prices of futures contracts of an asset by increasing liquidation risks faced by traders. A consistently high and positive funding rate implies there is a bullish sentiment among market participants and there is an expectation of a price hike. A consistently negative funding rate for an asset implies a bearish sentiment, indicating that traders expect the cryptocurrency’s price to fall and a bearish trend reversal is likely to occur.

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