Lessons From The False BTC ETF Report

It was the buzz early Monday morning that caught the attention of Wall Street and crypto enthusiasts alike: the long-anticipated spot Bitcoin ETF – specifically, BlackRock’s iShares Spot Bitcoin ETF – had been approved. Or so it seemed.

Those tuning into Twitter were met with a flurry of posts from analysts and influencers echoing the news.

A glance at the trading charts revealed bitcoin's (BTC) price was surging by more than 6%. It appeared as if the pivotal moment many had been waiting for had arrived.

But, in a twist that perfectly encapsulates the funny world of crypto, the celebrations were premature.

The pump and all the chaos that ensued was all based off nothing but a lie.

The Real Story Behind the Buzz

The catalyst for the frenzy? A fake news tweet, which had all the hallmarks of a novice error, from CoinTelegraph.

Shortly after the false report, BTC surged from $27,900 to $30,000, only to cascade back down to ~$28,000 after everyone realized, with added confirmation from BlackRock, that the report was indeed false.

According to data from CoinGlass, ~$81 million worth of short positions were liquidated on the move to $30,000, and ~$31 million in longs, were liquidated on the way back down.

Put it all together and you can say that just one tweet can move about $110 million in less than an hour.

So, What Did We Learn?

Naturally, the whole fiasco illustrates the notoriously volatile nature of crypto investing and just how quickly misinformation can spread online and cost people massive sums of money.

But one thing is for sure. Whoever thought the ETF was already priced in has just been proven wrong.

When this ETF does get approved, is it that far fetched now to expect to a 10-20% move? Probably not.

But it didn’t stop there, as we saw various “bitcoin stocks” benefit from the news as well.

Coinbase (COIN) and MicroStrategy (MSTR) both opened 5% higher. PayPal (PYPL) jumped 2%. And Novogratz’s Galaxy Digital (GLXY) surged 8%.

Now, many of these stocks have come back down since, but it still goes to show that when the approval does hit the market in a legitimate manner, investors should expect an uptick there as well.

Perhaps the most interesting takeaway is the latest movement on Grayscale’s Bitcoin Trust (GBTC).

To catch you up, last week, the SEC said it wouldn’t appeal the loss in its case against Grayscale, which is thought to boost the chances of GBTC eventually being converted to a spot ETF.

Then, during Monday’s fake news event, GBTC’s discount to NAV fell sharply. But, unlike bitcoin itself and the equities highlighted above, the discount didn’t quickly revert back.

In other words, the GBTC discount narrowed on the news and continues to narrow.

If anything, this is a direct indication that the chances of an ETF approval are increasing, despite this week’s big fake out. 🙂