Bitcoin’s Surprise: Bad News Didn’t Stop its Rally
Over the past week, the bitcoin price has increased nearly 8% in a steady grind higher, taking it above the psychologically important USD 6,500 level. The most interesting thing to note about the rally, however, is that it has come without any obvious fundamental drivers to point to, and despite news coverage that would normally be considered negative for the bitcoin price.
As seasoned traders and investors know, it is often considered a very bullish sign when an asset increases in price despite negative news coverage. It shows that the upward momentum is strong, and that there are buyers standing by in the market, ready to buy up even the slightest dip in price.
Major Bitcoin bug detected
This Sunday, Travis Kling, founder of the new crypto hedge fund Ikigai, on Twitter echoed the sentiment that bear markets normally don’t respond positively to negative news events.
In the tweet, Kling referred to a recently discovered bitcoin bug, disclosed in an official Common Vulnerabilities and Exposures (CVE) report from Bitcoin Core developers. According to the report, an attacker could potentially have exploited the bug to mine invalid blocks, essentially creating new bitcoins beyond the 21 million BTC cap. Despite this serious bug and the warning that there is a small chance of a chainsplit, bitcoin continued its week-long grind higher.
Bitcoin ETF delayed… again
Another news story that bitcoin hodlers and traders alike took note of this past week was that we will likely have to wait even longer for the first bitcoin-backed exchange traded fund (ETF) to be approved in the US.
In a notice published online, the Securities and Exchange Commission (SEC) asked for more comments from the public in connection with a proposal to list an ETF backed by “physical” bitcoin by financial firm VanEck. The SEC also made it clear that it needs more time to reach a decision on whether to approve the proposal.
Again, the price of bitcoin reacted to the news by trading higher, adding nearly 2% on the day the news was released, before surging close to 4% on the following day.
Despite widespread speculation that the ETF may not be approved until March next year, some members of the community attributed the gains to the fact that the language of the official notice was more positive than earlier. In addition, the SECs decision to ask for more comments was largely seen as a positive development, signaling a willingness by the regulator to learn more about the bitcoin market.
New York vs. exchanges
Perhaps, most entertaining this past week was a show-down between a number of cryptocurrency exchanges and New York’s attorney general.
In a statement, attorney general Barbara D. Underwood blasted cryptocurrency exchanges Binance, Kraken, and Gate.io for failing to provide information requested by her office. She added that the three exchanges have been referred to the New York State Department of Financial Services for “possibly operating unlawfully in New York.”
CEO of Kraken Exchange, Jesse Powell, posted a response on Twitter saying that “NY is that abusive, controlling ex you broke up with 3 years ago”, reminding that the exchange is not operating in New York.
Once again, bitcoin traders appeared unaffected and reacted by sending the coin higher both on the day of the news and the next day.
Lastly, Japanese cryptocurrency exchange Zaif became the victim of yet another exchange hacking scandal this past week. In the early hours of September 20, the company issued a statement saying that its network had been compromised by hackers four days earlier.
According to the statement, hackers got away with 5,966 BTC, worth approximately USD 40 million, from users’ hot wallets on the exchange.
Also, it appears as if the exchange first tried to cover up the hack from its users, saying on September 17 that it had suspended withdrawals and deposits due to “sever failure.”
As became known three days later, however, the real reason for the suspension was a security breach. Despite this, bitcoin traders didn’t seem to care, sending the number one cryptocurrency surging another 3.9% for the day.
So, if following the news makes you confused about what the market is doing, perhaps it is better to instead listen to the words of the legendary American stock investor Jesse Livermore, who once said:
“Markets are never wrong but opinions often are.”