A recent cryptocurrency hoax triggered an $85 million liquidation and a stern warning from the U.S. Securities and Exchange Commission (SEC).
A false report, wrongly claiming that BlackRock Inc. was set to launch a cryptocurrency spot exchange-traded fund (ETF), triggered a brief 10% Bitcoin rally which quickly crumbled.
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Market turmoil
On that fateful Monday morning, an erroneous news report falsely stated that BlackRock had secured approval for its cryptocurrency ETF. The market went wild, and Bitcoin surged above $30,000, its highest level since July.
However, the joy was short-lived as BlackRock clarified that its ETF application was still under review. This rollercoaster ride left traders with losses, and over $85 million worth of trading positions were liquidated within 24 hours.
Regulatory concerns
This incident reignites the debate about whether the market has priced in the arrival of an ETF tracking Bitcoin. It also highlights concerns held by regulators regarding the lack of basic protections for retail investors in cryptocurrency. The crypto market remains a wild, unregulated frontier, attracting both shady operators and rampant speculation.
Despite past setbacks, companies continue to vie for the coveted spot-Bitcoin ETF approval in the United States. There are currently more than ten outstanding applications, and with heavyweights like BlackRock, Invesco, and Fidelity in the race, chances of approval seem stronger.
The fact that this fake news could trigger such a surge suggests that the market has not yet priced in the potential approval.
SEC’s Stark Reminder
The SEC swiftly responded to the chaos with a pointed message on social media: “Careful what you read on the internet. The best source of information about the SEC is the SEC.” This served as a stark reminder about the unreliability of online information, especially in the crypto sphere.
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This rollercoaster began with cryptocurrency news outlet Cointelegraph erroneously reporting the SEC’s approval, further amplified on social media. BlackRock’s debunking and Cointelegraph’s subsequent edit, adding “reportedly,” drew criticism and frustration from the community. These media missteps contributed to about $182.5 million in liquidations over 24 hours.
Such episodes of misinformation could give the SEC reasons to deny Bitcoin ETF applications, according to experts. The crypto market’s vulnerability to fake news and speculation underscores the need for better regulation and information verification.
Despite these challenges, experts remain optimistic. Bloomberg analysts project a 90% probability of a spot Bitcoin ETF approval by January 10, 2024. BlackRock’s CEO, Larry Fink, noted the surging interest in cryptocurrencies and their potential as a safe haven during uncertain economic times.
