Bitcoin and tightly related stocks surged, then fell back
Bitcoin (BTC 0.18%) and related stocks soared on Monday morning. The largest cryptocurrency gained as much as 8.4%, according to data from S&P Global Market Intelligence. Grayscale Bitcoin Trust (GBTC +0.46%) rose as high as 16.2% and leading Bitcoin miner Marathon Digital Holdings (MARA +10.17%) topped out at a 16% gain.
But the big gains didn't last. Bitcoin backed down to a 24-hour gain of 4% at 1:15 p.m. ET. By then, Marathon had cooled down to a 7% price jump and Grayscale's Bitcoin fund was only up by 2.1%. The morning's report of potentially game-changing Bitcoin news turned out to be social media speculation after all.
CRYPTO: BTC
Key Data Points
Long-awaited news? Nope, just speculation again.
Early this morning, crypto news outlet Cointelegraph posted some massive Bitcoin news across its social media accounts. According to these posts, the Securities and Exchange Commission (SEC) had approved BlackRock's application to introduce an iShares exchange-traded fund (ETF) based on Bitcoin's spot price. Currently, no such financial vehicles are available -- existing Bitcoin funds like the Grayscale trust are either managed in the form of old-school mutual funds or as ETFs referring to the price moves of Bitcoin futures.
Investors have been waiting for the first Bitcoin ETF for ages, watching the SEC kick that can further and further down the road without approving any of the many ETF applications or even committing to a review of that paperwork. So it was no surprise to see Bitcoin prices soaring on this report from a generally respectable news source in the cryptocurrency community, followed by surging prices among large Bitcoin holders such as the Grayscale Bitcoin Trust or Marathon Digital, which works to increase its Bitcoin reserves through active mining of new tokens.
But BlackRock has debunked the news report. The SEC's consideration of a proper iShares Bitcoin ETF is still under review. Cointelegraph has apologized for this inaccurate reporting, taken down the misleading social media statements, and embarked on an internal review of the incident. And that's why the morning's market excitement melted away in a hurry, leaving investors with much smaller gains.
NYSEMKT: GBTC
Key Data Points
Will the SEC ever approve a Bitcoin ETF?
A long list of prospective Bitcoin ETF managers are waiting for a real SEC approval, led by Grayscale and the financial powerhouse BlackRock. So Cointelegraph's report seemed plausible enough at first glance. Then again, the SEC will probably announce a decision to actually consider an ETF application several days or weeks before giving it the final thumbs-up. So the timing didn't seem quite right, and now we're looking at a temporary price spike based on unsubstantiated rumors.
That may sound like some harmless fun, but sudden price jumps like this one can have very real and painful effects on investors. In particular, many short-sellers of assets like Bitcoin, the Grayscale trust, and Marathon Digital were probably forced to liquidate their bearish positions and record large losses in the process.
And now, investors in Bitcoin and related stocks go back to waiting for a real SEC announcement that moves the story forward in some way. To be clear, a fully approved and regulated Bitcoin ETF would allow many investors direct access to Bitcoin's long-term price chart for the first time. That applies to any stock brokerage that provides access to ETFs but not to cryptocurrencies. Bitcoin bulls can't wait to see those floodgates open for real, so today's high-octane market response made all kinds of sense.
