Despite yesterday’s approval, the SEC’s premature tweet announcing a Bitcoin ETF on Tuesday sent the cryptosphere into uproar. For a brief moment, bulls, bears, Bitcoin skeptics and blockchain advocates were united in their condemnation of the US financial regulator and its chair Gary Gensler.
Confusion reigned, BTC spiked, and crypto Twitter let rip with memes about SEC incompetence. While the incident provided no end of humor, it had serious ramifications – particularly for traders who were liquidated due to the fake news. And from a regulator tasked with dampening market manipulation no less. The tweet, followed by a hasty retraction by Gary Gensler, has overshadowed the main event: approval of the first Bitcoin ETF.
Crypto Hits Season High as SEC Takes Center Stage
The events of January 9th 2024 will be indelibly marked in the memories of those who lived through it. It bore all the hallmarks of a financial thriller – a Wolf of Wall Street or, in the view of Nexo’s Magdalena Hristova, “a telenovela.” High on drama, in other words, with back-to-back facepalm moments. As Hristova, who also hosts the Social Block podcast, riffed, “Just as a TV audience eagerly awaits a major revelation that could shift the entire narrative, the potential for a dramatic spot ETF regulatory approval caused ratings – i.e. prices – to soar.”
As Bloomberg’s Matt Levine put it, “the SEC got trolled on Bitcoin ETFs.” While BTC spiked to $48K when the false tweet was sent, it quickly dumped the moment the SEC regained control of its account and Gary Gensler confirmed that the gun had been well and truly jumped. “How are you supposed to protect investors when you can’t even protect your Twitter account?” raged basically everyone.
Not everyone is convinced that the account hijacking, caused by failure to use 2FA, was intended to manipulate the market incidentally. While Levine concedes that money was lost and made on the trade, he leans more towards it being high-jinks than a serious attempt at manipulation.
Who Can You Trust?
Crypto’s “don’t trust, verify” mantra is fine in the context of blockchain verification, but less reliable when applied to verified Twitter accounts. Had the news been tweeted by any account other than the SEC’s official handle, its impact would have been diminished. But with both the language and the timing suggesting the dispatch was official, crypto investors naturally assumed it was legit.
As Hristova reflects, “The crypto industry is getting a little tired of false ETF approvals and the effects are no longer quite so net-neutral – the fake news needs to stop.” As for the effect the tweet had on the market, she notes crypto’s “youthful exuberance and sensitivity. Our space is hopeful and prepared, yet vulnerable to the winds of (mis)information.” The saga, she concludes, “underscores the power of media, social media, and the spoken word in the blockchain space.”
For those who love a good conspiracy theory, meanwhile, or a trashy telenovela, Levine writes: “It does bear mentioning that Twitter is owned by Elon Musk, who loves trolling and hates the SEC. “I want to be clear. I do not respect the SEC. I do not respect them,” is one of the nicer things Musk has said in public about the SEC. It is convenient and funny that Musk’s Twitter was used yesterday to make the SEC look stupid.”
There were red faces all round on Tuesday when those who’d posted jubilant tweets, crafted weeks in advance, were forced to follow the SEC’s lead and delete them. But the real embarrassment was reserved for a financial regulator whose chair would happily never hear the words “Bitcoin ETF” again. Unfortunately, it’s all he’ll be talking about for weeks. Bitcoin is here and it’s not going away any time soon.