In recent events, the cryptocurrency market experienced a significant sell-off in response to false news regarding approving a spot Bitcoin exchange-traded fund (ETF). The incident sheds light on how the market could react to genuine ETF approval news, as speculated by industry analysts.
Fake SEC approval announcement sparks market turbulence
On January 9, the official X (formerly Twitter) account of the United States Securities and Exchange Commission (SEC) posted a fabricated announcement, claiming that the regulatory body had granted multiple approvals for Bitcoin ETFs to be listed on registered exchanges. This erroneous news sent shockwaves through the crypto community and prompted a swift market response.
SEC Chair Gary Gensler swiftly addressed the situation, taking to X to inform the public that the SEC’s account had been compromised, and no spot Bitcoin ETF products had received approval from the agency. This revelation exposed the false nature of the initial announcement.
The fake news on ETF approval provided an intriguing insight into how the market might react when genuine approval news finally arrives. K33 Research analyst Vetle Lunde observed that the immediate aftermath of the false announcement indicated a potential “sell-the-news” reaction from market participants.
Lunde noted that, initially, very few individuals expressed suspicion regarding the SEC’s announcement within the first 14 minutes of its publication. Following the news, a surge of bullish sentiment led to increased buying activity, causing Bitcoin’s price to spike to as high as $47,870 in just four minutes. However, this rapid ascent was followed by a sharp drop to $46,000 over the next 10 minutes.
This swift reversal of fortune highlights the market’s vulnerability to sudden shifts in sentiment, even in response to false information. It also underscores the importance of discerning genuine news from rumors and speculation.
Cathie Wood’s perspective on ETF approval
Cathie Wood, the founder, CEO, and chief investment officer of ARK Invest, a potential Bitcoin ETF issuer, shared her insights. Wood anticipates that when actual ETF approval news arrives, some investors may opt to sell their positions in a short-term reaction. This expectation stems from the substantial anticipatory buildup surrounding the approval process.
Wood emphasized that such a short-term sell-off would likely be temporary, as the SEC’s green light for a spot Bitcoin ETF would open the door for institutional investors to participate in the cryptocurrency market. She firmly believes that the long-term outlook for Bitcoin and the broader crypto market remains promising and should take precedence over short-term fluctuations.