The cryptocurrency market in Q3 2023 exhibited interesting dynamics. Bitcoin demonstrated resilience by declining only 10.9%, outperforming the broader CoinDesk Market Index (CMI) which fell by 11%. On the other hand, Ether faced a slightly steeper decline at 12.5%, underperforming compared to Bitcoin. The performance of these major cryptocurrencies gains significance when viewed in the context of the entire year, where Bitcoin has shown an impressive 64% gain, and Ether has risen by 41%. Institutional demand for Bitcoin ETFs played a significant role in supporting BTC. Meanwhile, other tokens faced regulatory pressure, leading to a growing gap between established majors (Bitcoin and Ether) and alternative tokens.
Looking at the sector-wise performance, the Computing and DeFi sectors displayed relative outperformance in Q3, with a rise of 3% and a decline of 8%, respectively. Conversely, the Smart Contract Platform and Culture and Entertainment sectors saw declines of 13% and 22%, indicating underperformance.
The regulatory landscape, particularly in the U.S., was a key driver of price movements in this quarter. The anticipation of potential approval for spot ETFs led to notable price actions. September saw a boost in DeFi and Digitization sectors, partly due to a favorable outcome in a Ripple court case and growing investor interest in AI.
Looking forward, a potential approval of a Bitcoin spot ETF could significantly impact the market. It would enhance accessibility, diversify the investor base, ease institutional adoption, and potentially mark Bitcoin’s maturation into a regulated asset class. And this is what yesterday, for a brief moment, many investors thought would happen when a false news was released on BlackRock ETF.
Right after the end of Q3, yesterday an unexpected event happened. Bitcoin experienced a surge from $27,900 to $30,000 following a false report of the BlackRock spot ETF approval. The report, released by popular news channel Cointelegraph, circulated on social platforms, triggering nearly $100 million in liquidations within an hour. However, this surge was short-lived as skepticism from analysts and reporters swiftly followed. BlackRock, the prominent investment management firm, confirmed the report to be false.
CoinGlass data revealed that during this price movement, approximately $81 million in short positions (bets against higher prices) were liquidated as Bitcoin crossed the $30,000 mark. Subsequently, a correction led to the liquidation of $31 million in long positions (bets on higher prices). These liquidations occur when traders are unable to meet margin requirements for their leveraged positions.
The false report was promptly deleted after almost 30 minutes, but the ensuing price impact was significant. Bitcoin's price retreated to approximately $28,000 following the clarification.
The Securities and Exchange Commission (SEC) website provided no evidence of approvals for a spot Bitcoin ETF, emphasizing the misleading nature of the initial report. Additionally, Bloomberg reported that BlackRock's application is still under review.
This incident highlights the sensitivity of the cryptocurrency market to misinformation and the importance of verifying news from credible sources.