Oct 18, 2023

BlackRock ETF Approval?

Bitcoin Macro

Over the past few weeks, the crypto markets have been relatively quiet, that is until the day before yesterday. Cointelegraph shared some ‘fake news’ about the BlackRock ETF being approved, which sent ripples across the market. Several small and large accounts started resharing this misinformation, believing it to be true. This caused a spike in the price of Bitcoin. It’s unclear whether someone at Cointelegraph found this false news in an obscure Telegram channel and irresponsibly shared it without confirming, simply to be first, or whether there was some more elaborate deception at play.

First, we had a major development on Friday, as the SEC didn't appeal Grayscale's court case, significantly increasing the odds of ETF approval. While the SEC may still reject Grayscale's application on new grounds, it is running out of justifications to delay ETFs. Some reasons to reject the ETF include ‘trading based on material, non-public information, including spreading false and misleading information’. Given yesterday's events, this could be used as a basis to reject the ETF. However, we don’t think this is a reasonable justification, since misinformation can occur in any market, and ultimately it is up to participants to discern truth from fiction.

Second, suspicious price action on Monday suggests someone with insider knowledge may have paid substantially to get Cointelegraph to share this misleading tweet, which they kept online for at least 30 minutes. Despite the major SEC news on Friday, the market didn't start rising until Monday morning, which is strange, since the ETF approval likely could have been front run much sooner. The aggressive buying from those who were probably planning to spread this misinformation left a footprint on order books and charts. Furthermore, if Cointelegraph knew the information was false, they could have deleted the tweet immediately, yet they chose not to, leaving it online for at least half an hour.

This event really confirms why crypto regulators globally continue to be very active. Some are taking constructive steps like Singapore, Hong Kong and UAE granting licenses, while others like the UK and Australia are imposing stricter rules to protect consumers. In the US, agencies like the SEC, CFTC and DoJ are aggressively targeting scammers and questionable practices, and over time we will have much more clarity in the crypto space, with much less fraud. Although we believe several US agency actions are positive, that doesn’t mean they haven’t made mistakes or might be overreaching. Encouragingly, US courts may provide balance on any regulatory overreach, which is why we think the SEC will also lose its lawsuit against Coinbase, while Coinbase may stop the IRS from implementing measures that could hurt crypto holders.

Bitcoin Macro

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