Bitcoin seemed poised for its most promising day since April 2022, only to be abruptly sent into a downturn by a single tweet from the Securities and Exchange Commission (SEC).
Initially seen as an endorsement of a spot bitcoin ETF, the situation shifted when Gary Gensler, the chairman of the SEC, clarified that the apparent approval, given through a Tweet or post on the now X, was actually a consequence of the SEC’s account being compromised.
“The @SECGov Twitter account was compromised, and an unauthorized tweet was posted. The SEC has not approved the listing and trading of spot bitcoin exchange-traded products,” Mr Gensler wrote.
Moments later, the SEC issued an official statement reading: “The SEC’s @SECGovX/Twitter account has been compromised. The unauthorized tweet regarding #bitcoin ETFs was not made by the SEC or its staff.”
Media reports in the US have suggested that pressure is building for the SEC to investigate itself for market manipulation after moving the price of bitcoin up and then down with the allegedly hacked tweet.
“Days like this remind me that 1/ the SEC should be investigating itself for multiple things 2/ crypto Twitter remains undefeated in memes,” posted Ripple chief executive officer Brad Garlinghouse on X.
Speaking to InvestorDaily, Angel Zhong of RMIT University said the compromise of SEC’s account highlights the susceptibility of social media platforms to misinformation.
“Investors should exercise caution, verifying information from official sources to avoid market volatility and potential financial risks. Cyber security measures for regulatory bodies must be strengthened to maintain the integrity of financial communication channels,” Ms Zhong said.
She stressed that the breach of the SEC’s account and the subsequent market reaction underscore the intricate connection between cyber security vulnerabilities and the digital finance landscape.
“As the popularity of digital assets like bitcoin grows, so does the need for robust cyber security measures to safeguard both information integrity and investor confidence.
"This incident serves as a stark reminder of the broader implications of cyber threats on the evolving landscape of financial technology,” Ms Zhong said.
Asset managers Franklin Templeton, BlackRock, Fidelity, and several others are currently in the race to launch the first ETF in the US that invests directly in bitcoin.
Having filed their applications to the SEC last year, the firms are said to be eagerly awaiting the SEC’s decision.
The SEC has previously approved bitcoin futures ETFs in the US but has rejected spot bitcoin ETF applications, often citing its concerns over market manipulation and investor protections.
According to US media, the SEC is on a tight deadline and must decide on one of the applications, filed by Ark and 21 Shares, by this Thursday, Australian time.
CoinDesk has estimated that SEC’s Wednesday mix-up wiped out over $50 million of leveraged derivatives trading positions within an hour.
Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.