The Cause and Effect of False News on BTC Fluctuations, and the Future of BTC Spot ETF

10/25/2023·1years ago

Is the BTC ETF about to be approved? Just last night, BlackRock threw us a curveball once again.

Yesterday, news of BlackRock iShares Bitcoin Trust being listed on the DTCC website caused a stir on social media. However, DTCC quickly took down the relevant entry and, upon re-listing it, changed the "Create/Redeem" option from "Y" to "N".

This was not the only mishap.

Within an hour on October 16, a piece of news about the approval of a BTC spot ETF sent the market into a frenzy. As the price of Bitcoin surged and then quickly fell, positions worth nearly $100 million were liquidated.

The source of the news was a tweet posted by Cointelegraph on X, which was later confirmed to be false. However, despite the market quickly adjusting, the reputational and legal impact may not be over. As members of the crypto community cry foul play, let's review what happened, and the possible consequences and implications.

The Cause of the False News Event

Origin

The crypto community had been eagerly awaiting news of the first BTC spot ETF in the US. At around 9:30 PM Beijing time on October 16, Cointelegraph posted a message on X claiming that the US Securities and Exchange Commission (SEC) had approved the application for the BlackRock iShares ETF.

Within minutes, this news was shared by financial media outlet Benzinga, and then reported by Reuters, one of the most trusted news agencies in the world. As expected, the price of Bitcoin suddenly surged, and the entire market quickly entered a fervent bull market. According to CoinMarketCap data, the price of Bitcoin rose from around $27,962 to $29,388 in about five minutes. This represented a nearly $1,500 increase, or about 5%.

A few minutes after the initial news was released, Cointelegraph posted another tweet, which was identical to the previous one but added the word "reportedly" at the end. This suggestive modification became the most popular meme of the day.

Doubt

As journalists rushed to verify the news, it seemed difficult to find evidence to confirm the message. Then, 11 minutes after the surge in the price of Bitcoin, Eleanor Terrett, a reporter for Fox Business, announced that a source from BlackRock had confirmed that the news was false—their application was still under review. Analysts Eric Balchunas from Bloomberg and CoinDesk later broke the news, and 20 minutes after Bitcoin broke $29,000, it plummeted to $27,855—slightly lower than before.

Source of False Information

However, at first glance, the cause of this event seemed to be the lack of rigor in the initial reporting. Crypto detective @ZachXBT discovered a Telegram channel where a user posted the exact same false news 39 minutes before Cointelegraph's tweet. Cointelegraph later confirmed that this was the source of their news.

In a later tweet on the same day, Cointelegraph conducted a quick investigation. They found that there was no procedure for verifying the source of breaking news on social media before it was posted. Cointelegraph called this event a purely human error, a communication issue between the news and social media teams, and a failure to follow standard operating procedures.

Meanwhile, at an event in Dubai on the 16th, Cointelegraph's editor-in-chief, Kristina Lucrezia, emphasized that the pressure of digital news had contributed to this mistake: "When we are constantly under pressure to be the first to report every piece of news, this kind of situation will occur. This is not just a news problem, but a social and technological problem... If you are not the first, you are the last, and that is a big problem." However, members of the crypto community did not sympathize with this plight.

On October 17, Tim Copeland, editor-in-chief of The Block, shared a screenshot on X claiming to be from the mastermind behind this event, who stated that they did not profit from the sharp rise in the price of Bitcoin: "When I heard what happened, I really... shook for a few hours."

Market Manipulation?

Many crypto KOLs questioned whether there was any economic motive behind the false reporting. Many questioned whether this was a blatant case of market manipulation, while some speculated that someone might go to jail for this. Some even suggested that the reason the SEC was reluctant to approve a BTC spot ETF was due to concerns about market manipulation, and now it seems that approval may not be necessary at all.

This accusation, whether implicit or explicit, points to a journalist, editor, or other staff member establishing a short position in Bitcoin futures or options contracts, preparing for sudden market changes.

As of now, it seems that no one affected by the market fluctuations has explicitly made these accusations to regulatory authorities. If this were to happen, the situation could escalate rapidly. After all, the current title of the SEC resonates throughout the crypto world as a skeptic of cryptocurrencies.

The regulatory agency advised readers to "be cautious of information on the internet. The best source of information about the SEC is the SEC itself."

Subsequent Impact

Market Sentiment

The rapid surge and fall of Bitcoin due to false news did not disrupt the short-term upward trend. Interestingly, the subsequent market trend did not disrupt the short-term upward trend; in other words, we will continue to see increasing trading volume. Although there was a significant retracement, the bears did not take control of the market. By historical standards, the price is not high, which can be seen as good news. This means that new buyers are entering the market, rather than traders significantly exiting the market.

However, buyer interest is focused on Bitcoin, which accounts for over 50% of the total market value, the highest level since April 2021. This may be because Bitcoin is the first cryptocurrency recognized by the SEC as a commodity, while other cryptocurrencies have not been recognized. However, it may also be due to the increased complexity of financing and reduced developer activity in other currencies.

Industry Optimism for the Approval of BTC Spot ETF

Cathie Wood of Ark Invest recently expressed optimism, expecting the SEC to approve multiple ETFs.

On October 12, as the deadline for approval on January 10 approached, Ark updated its filing in response to the SEC's clarification request. Bloomberg analyst Eric Balchunas revealed this situation and pointed out that the SEC may make several inquiries and responses on these small but important details, and approval may not happen immediately, but positive interaction is a good sign. The Bloomberg analyst believes that the likelihood of the SEC approving the Ark Invest and 21Shares ETFs before the January 10 deadline is 90%. This will have a positive impact on the crypto market.

The veDAO Research Institute has compiled information on the application and decision deadlines for different ETFs for reference: