Abstract
Using data from the Financial Industry Regulatory Authority (FINRA), this paper provides the first evidence of informed short selling in spot Bitcoin ETFs. We show that shorting flows predicts negative ETF returns for up to five trading days, after which the effect dissipates. Short sellers increase their positions when Bitcoin investor sentiment reaches extreme optimism. Yet they do not exhibit the same contrarian trading behavior—selling short after price run-ups—that is commonly observed among equity short sellers. Overall, the results suggest that short sellers in spot Bitcoin ETFs are informed traders who exploit short-lived, sentiment-driven mispricing.