Bitcoin Crash: Hedge Fund’s $1 Billion Trade Goes Wrong

The Bitcoin price has plummeted from over $72,000 to as low as $65,500. While factors like liquidations and inflation fears have been cited, a rumor suggests a failed hedge fund trade may have also contributed.

The Failed Spread Trade

Andrew Kang, founder of Mechanism Capital, revealed that a hedge fund lost over $1 billion on a spread trade involving MicroStrategy (MSTR) and Bitcoin (BTC). The fund had bet on MSTR falling and BTC rising, but the market moved in the opposite direction.

The Unwinding

To cover their losses, the hedge fund sold BTC and bought MSTR. This contributed to the sharp decline in Bitcoin’s price. However, MSTR’s price also rose slightly as short sellers closed their positions.

The Hedge Fund’s Strategy

The hedge fund had expected MSTR to underperform BTC once the Bitcoin ETF was approved. However, MSTR has outperformed BTC, forcing the fund to unwind its positions.

North Rock Digital’s Involvement

The hedge fund in question is believed to be North Rock Digital. The firm had previously expressed skepticism about crypto equities and had been shorting them against long spot crypto positions.

Current Market Situation

At the time of writing, BTC is trading at $67,588. The market is still volatile, and it remains to be seen whether the dip will continue.