- The media amplification of the ETF rejection report caused the liquidations, not the report itself.
- Analysts noted that on-the-spot approval of a Bitcoin ETF is within reach.
The crypto market experienced one of its darkest hours on January 3 as Bitcoin prices soared [BTC] fell below $42,000. The collapse happened so quickly amid rumors that all Bitcoin ETF applications were rejected.
The details
In a report published by Matrixport, the digital asset company believed that the applications did not meet the desired requirements. It also mentioned that SEC Chairman Gary Gensler’s reluctance to embrace crypto could play a role in the rejection.
However, AMBCrypto’s research found that Matrixport was not the main reason for the price reaction.
This was because the piece was opinionated and Matrixport did not have the ‘power’ to destroy the market. There were also messages to explain how the company’s CEO, Jihan Wu, lacked the credibility on matters related to the ETFs.
Crypto investor and analyst Scott Melker shared a similar view in his post the same day.
The @realMatrixport report is not “fake news” as many report. It is an analyst giving an opinion. We all do it every day.
Most of the time we are wrong.
It went viral.
They can give their opinion.
They couldn’t have known that their research report would shake the market.
— The Wolf of All Streets (@scottmelker) January 3, 2024
Once again, disinformation triggers the market
AMBCrypto’s findings made the report fake news because a major publication amplified it. So the participants panicked and started taking drastic measures, while causing a liquidation of more than $500 million.
This incident was comparable to that of October 2023. At that time, another major publication reported that BlackRock had been given the green light to launch its ETF. As a result, Bitcoin price rose from $27,000 to $30,000 in an instant.
Moments later, the publication apologized for “misleading” the market. The apology then sent BTC back to $28,000. But in between all that, traders with open contracts felt the heat as $85 million was wiped out.
During that time, Michael O’Rourke, chief market strategist at JonesTrading said That:
“The fake news about the approval of the Bitcoin ETF highlights the challenge of protecting investors in an unregulated space that attracts shady operators and rampant speculation.”
As an extremely volatile market, fake news poses a serious threat to players who are genuinely concerned about the development of the industry. However, it is also important to note that the entire blame should not be shifted to publications that put out incorrect information.
The decision is getting closer and could be positive
As for the latest episode, people familiar with the matter have cleared the air about the development. Fox Business reporter Eleanor Terret, for example, Posted that the proceedings regarding the Bitcoin ETFs were approaching the final stage.
The January 3 update read:
“While the final decision has not yet been made, sources close to the proceedings say the SEC could begin notifying issuers of approval on Friday, with trading beginning as early as next week. ETF analysts and issuers alike remain confident that a favorable SEC decision will be made on or before January 10 as the SEC continues to meet with key players on this issue.”
At the time of writing, the Bitcoin price had recovered and changed hands to $43,129. Should the SEC make a positive statement on the ETFs by the aforementioned date, players are optimistic that BTC would rise above $50,000.
One of those projecting the increase is Christopher Inks.
Inks is a trader and prides himself on being an expert on market psychology. According to him, Bitcoin could break and reach $53,267 within a short time.
As mentioned on the show with @scottmelker This morning we see a nice rally from this morning’s flush. The H4 candle closed above the hourly pivot point. Daily looks even better. If we go higher, a target of at least ~53267 should appear on this chart. #Bitcoin $BTC pic.twitter.com/ykocFr3Ueo
— Christopher Inks (Trader/Market Psychology Coach) (@TXWestCapital) January 3, 2024
At the same time, the emerging reports did not constitute confirmation that the SEC would not deny the applications.
In the meantime, on-chain data showed that BTC trading volume reached an incredible level. At the time of writing, volume was $47.38 billion.
The increase in volume was a sign that the dip was filled very quickly. Like volume, Bitcoin’s weighted sentiment rose to 2.19.
Source: Santiment
Weighted Sentiment shows the unique social volume or commentary associated with a project. So the positive results indicate that the broader market has its eyes on a possible ETF approval in the coming days.
Who gets flushed in the end?
The statistics implied that players have left the fake news behind and are now holding out based on personal sentiment. However, both longs and shorts are at risk of liquidation, as shown in the Liquidation Heatmap.
The Liquidation Heatmap predicts the price levels where large-scale liquidation events could occur. According to AMBCrypto’s analysis of the HyblockCapital indicator, shorts with price targets between $40,750 and $41,250 could be liquidated.
Also, those with open positions who believe Bitcoin would fall to $36,000 could be hit with a flush. For longs, there was a cluster of liquidity around $47,100. So traders may need to be cautious around that level.
Source: HyblockCapital
In conclusion, recent events have shown that cryptocurrencies are still vulnerable to inaccurate information.
Despite Jihan Wu’s clarification Since their analysis was not intended to cause prices to collapse, crypto media must take responsibility for not participating in this intentional or unintentional misrepresentation.
Read the Bitcoin price forecast for 2023-2024
However, it is unlikely that the January 3 quake would influence the SEC’s decision on spot Bitcoin ETFs.
Although the path seems promising for approval, it is important to wait for the regulator itself to confirm its position.