SEC Says ‘Unauthorized’ Message on Bitcoin ETF Approvals Is Not Accurate

It was the moment the crypto world had been waiting for. Then it wasn’t.

The price of bitcoin (BTC-USD) soared to nearly $48,000 Tuesday afternoon after the Securities and Exchange Commission appeared to announce on X, formerly Twitter, that the regulator had given approval for the launch of Bitcoin spot exchange traded funds.

The SEC was expected to decide this week whether up to 14 different fund managers would be allowed to issue ETFs, which would allow ordinary investors to gain exposure to bitcoin without having to own it.

Fifteen minutes later, SEC Chairman Gary Gensler said the message was both “unauthorized” and inaccurate. In his own post on X, Gensler said the SEC’s account on that platform had been “compromised” and “an unauthorized tweet had been posted.”

“The SEC has not approved the listing and trading of Bitcoin spot exchange-traded products,” he added.

The price of the world’s largest cryptocurrency fell back to $45,500, losing $63 billion in market value in just a few minutes.

An SEC spokesperson said shortly after the incident that the unauthorized public post about X “was not authored by the SEC or its staff.”

The agency offered more explanation hours later, saying in a statement that it had determined there had been unauthorized access to the agency’s @SECGov period shortly after 4 p.m. ET” and that unauthorized access “was terminated.”

“The SEC will work with law enforcement and our government partners to investigate the matter and determine appropriate next steps regarding both the unauthorized access and any related misconduct.”

The communications mishap is the latest drama in a market frenzy surrounding the potential approval of these ETFs, which could expand widespread acceptance of the world’s largest cryptocurrency and make Bitcoin a potential must-have in the market. 401(k)s, IRAs and retirement plans.

Speculation around these products helped drive the price of bitcoin more than 150% in 2023. The cryptocurrency rallied again in early 2024 as investors became more optimistic about the approval of the requests.

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Three of those applicants told Yahoo Finance earlier Tuesday that they expected the SEC to approve their applications on Wednesday and that negotiations could begin as early as Thursday depending on that timeline.

One of these potential issuers said it was in contact with the SEC following Tuesday’s message incident and still expects to be declared effective around 5 p.m. ET on Wednesday.

Anthony Scaramucci, a longtime crypto proponent, pushed back on Gensler’s explanation of Tuesday’s communications incident.

“I think Gensler is lying,” he said of X. “I bet some employee made a mistake and jumped the gun and he’s putting the blame on X.”

Candidates include some of the biggest names on Wall Street, from BlackRock (BLACK) to Franklin Templeton (BEN), as well as a number of more well-known companies in the crypto world.

BlackRock headquarters in Manhattan. (STRF/STAR MAX/IPx 2021) (STRF/STAR MAX/IPx)

JPMorgan Chase (JPM) and Goldman Sachs (GS) are among the giant banks that have offered to help some of these fund managers create and redeem shares in their new funds.

“We believe that [spot bitcoin] The ETF is going to be an incredible tool to unlock entirely new pools of capital employed in Bitcoin,” said the CEO of Riot Platforms. Jason Les told Yahoo Finance. “It’s a rising tide that will lift all boats in the industry.”

Gautam Chhugani, managing director of AllianceBernstein’s research arm, said his team estimates these financial products will generate $10 billion or more in investment flows through the end of 2024 and “hundreds of billions of dollars” over a period of two years.

This, he added, will help drive the price of Bitcoin even higher.

Bitcoin is still far from its all-time high of $68,789 set in 2021, when it benefited from a period of low interest rates and fiscal stimulus that put excess savings into investors’ pockets .

The market crashed in 2022 as rates rose and crypto exchange giant FTX collapsed, before digital assets make a comeback in 2023.

Bitcoin’s surprising rise last year coincided with optimism about the arrival of ETFs due to a BlackRock filing and a court ruling in favor of another ETF applicant, Grayscale Investments.

The SEC has in the past rejected such requests, arguing that the products were vulnerable to market manipulation.

The regulator is also the industry’s most significant adversary, having filed numerous lawsuits and enforcement actions against key players.

Just this Monday, Gensler offered some cautionary advice to anyone considering investing in crypto assets.

He said on X that “investments in crypto assets can also be exceptionally risky and are often volatile. A number of major crypto platforms and assets have become insolvent and/or lost value. in crypto assets continue to be subject to significant risks.”

The bullish case for 2024 is that many of crypto’s biggest problems are now officially in the post-crime rearview mirror. conviction the founder of FTX, Sam Bankman-Fried, and a guilty plea from Binance CEO Changpeng Zhao.

Investors are optimistic that the sector is poised to benefit from greater acceptance and regulatory clarity from Washington.

They’re also excited about bitcoin’s April “halving,” an event every four years that halves the cryptocurrency’s daily issuance — and usually leads to another surge.

Any interest rate cuts from the Federal Reserve in 2024 could also boost demand, as could accounting changes expected in December that would make it less unfavorable for large companies to keep crypto on their balance sheets.

“We believe bitcoin will reach $150,000 by 2025,” Chhugani added.

David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto and other areas of finance.

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