$120 million in shorts liquidated following Grayscale ruling

Derivatives trailers took a wash on a sudden influx of volatility following the Grayscale ruling

August 30, 2023 02:42 pm

AdolescentChat/Shutterstock modified by Blockworks

Following a historic ruling that may clear the path for an eventual spot bitcoin ETF, traders holding short positions have been liquidated to the tune of $120 million in just 24 hours.

On Tuesday, a panel of three judges from the DC Circuit Court of Appeals sided with asset management company Grayscale in their June 2022 suit against the US Securities and Exchange Commission, which centered on whether the $50 billion firm could convert its Bitcoin investment trust to a direct exchange traded fund (ETF).

In an email to Blockworks, an SEC spokesperson wrote, “We are reviewing the court’s decision to determine next steps.” Nonetheless, many observers have said that the ruling paves the path to an eventual Bitcoin spot ETF.

In anticipation of fresh inflows from Wall Street investors, prices across the cryptosphere ripped higher on the news. Ether (ETH) rose as much as 5.5% and bitcoin (BTC) by 7.2% in a broad-based rally.

The volatility proved to be particularly troublesome for derivatives traders. Per data from Coinglass, $169 million in positions were liquidated, with short positions accounting for nearly two-thirds at $120 million. The liquidations were the most since Aug. 16 when over $1 billion in positions were wiped as the market crashed.

The wipeout hasn’t stopped new traders from piling in, however. According to DeFiLlama, the amount of open interest on-chain increased 150% in the past 24 hours on Ethereum alone, with total cross-chain derivatives volume reaching over $2.5 billion.

Additionally, according to Velo, during a four-hour period on Tuesday the total open interest increased nearly tenfold from $3.8 billion to $34 billion.

Despite another strong ruling as a court dismissed a class-action suit against the Uniswap developers, prices have largely drifted lower on Wednesday. Bitcoin has fallen to $27,200 from a peak of $27,850 earlier in the day.

Get the news in your inbox. Explore Blockworks newsletters: