In recent discussions within the cryptocurrency industry, analysts, including figures such as Cathie Wood from ARK Invest, have speculated that the market’s reaction to the approval of a Bitcoin exchange-traded fund (ETF) may involve a short-term sell-the-news response.
A recent incident on January 9 added an interesting twist to this narrative. The official X (formerly Twitter) account of the United States Securities and Exchange Commission (SEC) posted a false news article, claiming that the regulator had granted approval for multiple Bitcoin ETFs to be listed on registered exchanges. The market swiftly reacted to this misinformation, experiencing a sell-off as Bitcoin tickers dropped to $45,492.
SEC Chair Gary Gensler later clarified on X that the SEC’s account had been hacked, and no actual approvals for spot Bitcoin ETFs had been granted. K33 Research analyst Vetle Lunde pointed out that this incident provided a glimpse into how the market might react when genuine ETF approval news surfaces.
Lunde noted that initially, very few doubted the SEC’s approval announcement in the first 14 minutes after publication. However, as the market responded with a rapid influx of long positions, a subsequent whipsaw effect ensued. Bitcoin’s price surged to $47,870 within four minutes after the fake approval tweet, only to sharply drop to $46,000 in the next 10 minutes.
Prominent figures in the industry, such as Cathie Wood, have previously predicted a short-term sell-off in response to ETF approval, attributing it to the anticipatory moves made by investors leading up to such a market event. Wood believes that any sell-off would likely be short-term, as the SEC is expected to greenlight spot Bitcoin ETFs for institutional investors, paving the way for long-term positive reactions.
Despite the speculative nature of these predictions, some analysts, including those from QCP Capital, argue that the potential approval of Bitcoin ETFs may already be priced into the market. They suggest that the initial reaction to the ‘approval’ incident was muted, with Bitcoin struggling to break out of a resistance area. This has led some traders to express confidence in a similar sell-the-news scenario if the SEC approves multiple Bitcoin ETFs on January 10, as widely anticipated within the cryptocurrency community.