Market Reaction on False Bitcoin ETF Approval Reveals Potential Response to Genuine Sanction
Summary:
Following fraudulent news about the approval of Bitcoin exchange-traded funds (ETFs) on Jan. 9, the market experienced a sell-the-news reaction. The information, posted from the hacked account of the U.S. Securities and Exchange Commission (SEC), claimed that the regulatory body had sanctioned various Bitcoin ETFs. The SEC Chair, Gary Gensler, clarified the hack, stating that no such approvals had been granted. Since then, analysts and industry figures have reflected on the market's reaction to the false news, indicating potential responses to the eventual real approval. Many believe that while possible short term selling may occur upon genuine ETF approval, long term market reactions will likely be more positive.
Deceptive information surrounding sanctioned Bitcoin (BTC) exchange-traded fund (ETF) on Jan. 9 caused a market reaction of selling based on the supposedly breaking news. On this day, the official X (previously known as Twitter) profile of the U.S. Securities and Exchange Commission (SEC) released a counterfeit post stating that the regulatory body had sanctioned several Bitcoin ETFs for listing on authorised exchanges. Clarifying this blunder, SEC chair Gary Gensler took to X confirming that the SEC account had been compromised and no such approvals had been granted for any BTC ETF products.
Analyst Vetle Lunde from K33 Research suggested that this forged ETF approval news indicates a potential market response to authentic approval revelations. Lunde posted on X, indicating, “Yesterday the market revealed its reaction; the approval drill of the ETF is supportive of a sell-the-news response”. The analyst stressed that the fraudulent announcement from the SEC was hardly doubted in the initial 14 minutes after being released.
Lunde said, “Directly following the disclosure, the market was overwhelmed with longs, triggering a violent fluctuation in the following minutes. With BTC dipping lower, the SEC 'intervened' and confirmed the hack, setting a floor”. The analyst highlighted the fact that BTC had escalated to a peak of $47,870 in the four minutes following the false approval post, only for it to experience a swift decline to $46,000 within the succeeding 10 minutes.
Various notable industry figures have previously suggested that the market might respond to ETF approval updates by selling in the short term. Founder, CEO and Chief Investment Officer Cathie Wood of ARK Invest, a potential Bitcoin ETF issuer, anticipates that some investors would likely sell on the realization of ETF approval, which is a largely expected event. Wood reiterated that the long-term market response is much more vital and favourable, signaling optimism for institutional investors to participate in spot Bitcoin ETFs.
Some market observers argue that an anticipated BTC ETF approval might not necessarily instigate any followed beneficial market activities. Analysts at QCP Capital believe that the potential ETF approval is widely expected and may not drive a major rally after the approval. They say, “The preliminary response to the 'approval' was understated with BTC failing to overcome the resistance area”.
Market traders also resonate with this viewpoint, one noted, “It was an evident sell-the-news scenario as prices fell sharply right after hitting a new high”. The trader also depicted their assurance concerning a similar price movement today, anticipating the SEC's approval of multiple Bitcoin ETFs on Jan. 10.
Published At
1/10/2024 2:18:51 PM
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