The positive impact of the BTC Spot ETF on the price increase of BTC over the past month is undeniable. The trading volume and net inflows of the BTC Spot ETF market have become important indicators for crypto investors to track to make comments on the state and future of BTC price and the crypto market. That also means that the impact of the BTC Spot ETF is not only through the law of supply and demand, but also guides investors' psychology.
I think the recent event with HODL, one of the ten US-listed Bitcoin ETFs, has shown us some of the scenario.
HODL saw its daily trading volume skyrocket from an average of $17M to over $400M. This increase coincided with VanEck's announcement to decrease its management fees, suggesting a potential link between the two events. However, the sheer volume and rapid rise point to deeper factors at play.
Analyst Dave Nadig suggested the possibility of algorithmic trading or bots manipulating the market. This theory is based on the presence of "headfakes" or “algo cliffs” – large, unfulfilled buy orders placed strategically to influence market perception or trigger reactions from other traders:
"If we zoom in you can see one of these "headfakes" clearly: The green bar is Bids, and over on the right you can see that for this few second window, 100k shares shows up "bid" but 9 cents below the last trade. Three seconds later its gone never having traded, but it served to "hold" the midpoint down for a few seconds.
None of this is provable "this person did X," But this kind of pattern in ETF trading isn't all that unusual on a "hot" name."Sophisticated trading algorithms, often referred to as bots, operate at lightning speed, executing transactions within milliseconds – a timeframe unimaginable for human traders. These algorithms can employ various tactics, some of which may be manipulative
[1].
Algo Bot Trading is no longer something strange in financial markets
[2]: stocks, commodities and even crypto. Alameda & Sam B.F. earned a lot of money thanks to trading bot
[3], many CEXs also support the Trading Bot feature for users such as Binance
[4], Bybit
[5], OKX
[6]. However, they are just Trading Bots with small capital when compared to Trading Bots in the stock market.
Many crypto investors are afraid that when Trading Bots join the BTC Spot ETF market, we will not have large fluctuations dozens of times on the BTC price chart like in previous cycles, but I don't think so. BTC has its own story, is still a highly volatile asset and brings high profits to experienced investors. The fact that Trading Bots generate profits from high-frequency trading is also of no concern, as they also help improve market liquidity.
What I worry about is that the stronger the financial potential of the force behind Trading Bots, the greater their ability to manipulate the market. By influencing the psychological trends of BTC Spot ETF investors, they can completely trigger a behavior that directly affects the BTC price in the Spot market, from which they will be able to manipulate the entire crypto market to create optimal profits for them.
I understand that when BTC enters the larger playing field in the form of the BTC Spot ETF, we also have to accept the rules of the new playing field, but the feeling of being at risk of massive manipulation is not pleasant at all.
Do you believe that the HODL event is related to Trading Bot? Are you worried about their impact on BTC price and the entire crypto market in upcoming bullrun?
[1]
VanEck Bitcoin ETF records 14x surge in daily volume[2]
Basics of Algorithmic Trading: Concepts and Examples[3]
Sam Bankman-Fried's High-Stakes Entry into Crypto: $500,000 Daily Crypto Losses[4]
Intro to Trading Bots: Understanding Spot Grid Trading[5]
Bybit Trading Bot[6]
OKX Trading Bots