It was the moment the crypto world had been waiting for. Then it wasn't.
The price of Bitcoin (BTC-USD) rose to nearly $48,000 on Tuesday afternoon after the Securities and Exchange Commission apparently announced on X, formerly Twitter, that the regulator had approved the launch of spot Bitcoin exchange-traded funds had granted.
The SEC was expected to decide this week whether up to 14 different asset managers would be allowed to launch the products, which would allow everyday investors to gain exposure to Bitcoin without having to own it.
Fifteen minutes later, SEC Chairman Gary Gensler declared that this message was both “unauthorized” and inaccurate. In his own message on X, Gensler said that the SEC's account on that platform had been “compromised” and that “an unauthorized tweet was posted.”
“The SEC has not approved the listing and trading of spot Bitcoin 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.
The SEC issued further explanations hours later, saying in a statement that it had determined that “shortly after 4 p.m. ET, an unknown party obtained unauthorized access to the @SECGov for a short period of time.”
“The SEC will work with law enforcement and our partners across the government to investigate the matter and determine appropriate next steps related to the unauthorized access and related misconduct.”
The Twitter account @SECGov was compromised and an unauthorized tweet was posted. The SEC has not approved the listing and trading of spot Bitcoin exchange-traded products.
— Gary Gensler (@GaryGensler) January 9, 2024
The communications mishap was the latest drama in the market frenzy over the possible approval of these ETFs, which could boost widespread adoption of the world's largest cryptocurrency and make Bitcoin a potential staple of 401(k)s, IRAs and retirement plans.
The story goes on
Speculation surrounding these products helped drive the price of Bitcoin higher by more than 150% in 2023. The cryptocurrency rallied again at the start of 2024 as investors became more optimistic that applications would be approved.
Three of those applicants told Yahoo Finance early Tuesday that they expect the SEC to approve their applications sometime on Wednesday and that trading could begin as early as Thursday based on that schedule.
One of those potential issuers said it had been in contact with the SEC following Tuesday's message mishap and still expects the notice to be declared effective around 5:00 p.m. ET on Wednesday.
A long-time crypto supporter, Anthony Scaramucci, rejected Gensler's explanation of Tuesday's communications mishap.
“I think Gensler is lying,” he agreed
I think Gensler is lying. I bet an employee messed up and jumped the gun and blamed X
— Anthony Scaramucci (@Scaramucci) January 9, 2024
Applicants include some of Wall Street's biggest names, from BlackRock (BLK) to Franklin Templeton (BEN), as well as a number of firms better known 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 asset managers create and redeem shares of their new funds.
“We believe that [spot bitcoin] “ETF will be an incredible tool to unlock whole new pools of capital for Bitcoin,” Jason Les, CEO of Riot Platforms, told Yahoo Finance. “This is a rising tide that will lift all boats in the industry.”
Gautam Chhugani, managing director of research at AllianceBernstein, said his team estimates that such financial products will generate investment flows of $10 billion or more by the end of 2024 and “hundreds of billions of dollars” over two years.
This, he added, will help push the price of Bitcoin even higher.
We will be holding a candlelight vigil at St. Phillips Catholic Church at 7pm EST to pay our final respects to all the bears. Your FUDing will always be remembered. Although they were taken from us too soon, they are in a better place now.
Goodnight sweet prince.
— David Bailey🇵🇷 redeemGBTC.com (@DavidFBailey) January 8, 2024
Bitcoin is still far from its all-time high of $68,789 set in 2021, a year in which it benefited from a period of low interest rates and fiscal stimulus that put excess savings into investors' pockets.
The market collapsed in 2022 as interest rates rose and giant crypto exchange FTX collapsed, before digital assets staged a comeback in 2023.
Bitcoin's surprise rise last year coincided with optimism about ETF adoption following a filing by BlackRock and a court ruling in favor of another ETF applicant, Grayscale Investments.
The SEC has rejected such applications in the past, saying the products are vulnerable to market manipulation.
The regulator is also the industry's most prominent adversary and has filed numerous lawsuits and enforcement actions against major players.
Just this Monday, Gensler offered some cautionary advice to anyone thinking about investing in crypto assets.
He said up
2⃣ Investing in crypto assets can also be extremely risky and is often volatile. A number of major platforms and crypto assets have become insolvent and/or lost value. Investments in crypto assets continue to be subject to significant risk.
— Gary Gensler (@GaryGensler) January 8, 2024
The bull case for 2024 is that many of crypto's biggest problems are now officially in the rearview mirror following the criminal conviction of FTX founder Sam Bankman-Fried and an admission of guilt by Binance CEO Changpeng Zhao.
Investors are optimistic that the industry is prepared for broader acceptance and regulatory clarity from Washington.
They're also excited about Bitcoin's April “halving,” a quadrennial event that reduces the cryptocurrency's daily issuance by half — and usually leads to another bull run.
Any rate cuts by the Federal Reserve in 2024 could also boost demand, as could accounting changes expected in December that will make it less difficult for large companies to keep cryptocurrencies on their balance sheets.
“We expect Bitcoin to rise to $150,000 by 2025,” Chhugani added.
David Hollerith is a senior reporter for Yahoo Finance, covering banking, crypto and other financial areas.
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