Bitcoin, the leading cryptocurrency by market capitalization, has managed to stay above the $28,000 level despite a brief spike and fall caused by false reports of a spot exchange-traded fund (ETF) approval by the U.S. Securities and Exchange Commission (SEC).
How a Fake Tweet Triggered a Price Surge
On Monday, October 16, 2023, a crypto news site called Cointelegraph posted a tweet claiming that the SEC had approved the first bitcoin spot ETF, which would allow investors to buy and sell the actual bitcoin rather than futures contracts or other derivatives. The tweet was based on a fake press release that appeared on a website that mimicked the SEC’s official domain.
The tweet quickly went viral and caused a surge in bitcoin’s price, which reached as high as $29,800 on some exchanges, according to CoinDesk data. However, the tweet was soon deleted and Cointelegraph issued an apology for spreading inaccurate information. The fake press release was also taken down and the SEC confirmed that it had not approved any bitcoin spot ETF.
The false rumor also triggered a wave of liquidations in the crypto market, as traders who had bet against bitcoin’s price had to close their positions to avoid losses. According to CoinGlass data, total bitcoin liquidations in the last 12 hours hit $137.2 million, with long liquidations coming in at $45.6 million and short at $91 million.
Why Bitcoin Spot ETFs Are Highly Anticipated
Bitcoin spot ETFs are considered to be one of the most sought-after products in the crypto industry, as they would provide a convenient and regulated way for retail and institutional investors to gain exposure to the underlying asset without having to deal with the technical and security challenges of buying and storing bitcoin directly.
However, the SEC has been reluctant to approve any bitcoin spot ETF proposals, citing concerns over market manipulation, fraud, custody, and investor protection. The regulator has repeatedly delayed or rejected applications from various firms, such as VanEck, Bitwise, and Wilshire Phoenix.
Currently, there are only two bitcoin ETFs available in the U.S., but they are both based on futures contracts rather than spot prices. These are the ProShares Bitcoin Strategy ETF (BITO) and the Valkyrie Bitcoin Strategy ETF (BTF), which launched earlier this month and have already attracted significant inflows from investors.
How Bitcoin Is Holding Up Amid Market Uncertainty
Despite the false ETF news and the subsequent price correction, bitcoin has shown resilience and has remained above the $28,000 level for most of the day. At the time of writing, bitcoin is trading at $28,512, up 5% in the past 24 hours, according to CoinDesk data.
Some analysts believe that bitcoin’s fundamentals are strong and that the demand for the cryptocurrency will continue to grow regardless of the regulatory hurdles. David Lo, head of financial products at Bybit, wrote in a note that on-chain activity shows bitcoin holdings by long-term investors are reaching record levels, while Ethereum’s gas usage is dropping significantly, leading to faster ether inflation.
Bitcoin has also increased its dominance – its share of the overall market capitalization of cryptocurrencies – while notching gains relative to ether. Bitcoin’s dominance is currently at 46%, while ether’s is at 18%, according to CoinMarketCap data.
Meanwhile, the broader crypto market is also showing signs of recovery after a turbulent week. The total market capitalization of all cryptocurrencies is currently at $1.8 trillion, up 4% in the past 24 hours. Some of the top performers include Solana (SOL), up 12%, Cardano (ADA), up 10%, and Polkadot (DOT), up 9%.