Bitcoin Turns Sharp After False Claim That SEC Approved ETFs

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Prices of cryptocurrencies moved sharply after a false post on the US Securities and Exchange Commission's official X account said the regulator had approved US spot bitcoin exchange-traded funds since Tuesday.

The fake post just after 4pm Washington time announced that the SEC “approves #Bitcoin ETFs for listing on all registered national securities exchanges.” It was immediately picked up on social media, business news websites and Bloomberg TV.

After 10 minutes, the SEC chair poured cold water on the announcement. Gary Gensler posted on his personal account at X: “The @SECGov Twitter account was compromised and an unauthorized tweet was posted. The SEC does not authorize the listing and trading of spot bitcoin exchange-traded products.

An SEC spokesman said the original post was “not made by the SEC or its staff.” By 5pm SEC staff regained control of X's account and the offending post was deleted.

“The SEC will work with our partners in law enforcement and government to investigate this matter and determine the appropriate next steps for both the unauthorized access and related misconduct,” the SEC said, attributing the unauthorized access to “an unknown party.”

Bitcoin rallied immediately after the post to gain 1.5 percent for the day, but quickly reversed course after confirmation the news was fake and the price fell 3.4 percent.

“The account is secure and we are investigating the root cause,” said Joe Benaroch, X's head of business operations.

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Cryptocurrency enthusiasts are on tenterhooks as the SEC is expected to decide later this week whether to recognize spot bitcoin ETFs.

At least 11 asset managers have applications pending before the SEC to launch spot bitcoin ETFs. The SEC faces a Wednesday deadline to approve some applications.

While the watchdog previously opposed such products, it now has less room for maneuver. A federal appeals court ruled last year that the SEC's rejection of Grayscale's application to convert its $29bn bitcoin trust into such an ETF was “arbitrary and capricious”.

So far this year, the volatile cryptocurrency has gained about 7 percent on hopes of SEC approval.

Several applicants said they received feedback from commission staff this week that approval was possible.

Applicants range from large asset managers BlackRock, Invesco and Franklin Templeton to smaller firms such as Ark Investment Management and Bitwise. Earlier this week, companies released prices for their upcoming products, with many of the hopefuls agreeing to significantly lower their prices or waive them entirely shortly after launch.

The SEC has long argued that spot bitcoin ETFs cannot guarantee investors the same level of protection as traditional investment products. Gensler posted a post on Monday Short thread X outlines potential drawbacks to investing in cryptocurrency products, noting that issuers “may not comply with applicable law” and that crypto investments “can be exceptionally risky (and) often volatile”.

ETFs hold assets like mutual funds, but trade on exchanges like stocks and generally enjoy preferential tax treatment in the US. Each of the outstanding ETFs will only invest in Bitcoin, an evolution of previous products that invest in cryptocurrency futures or companies involved in the crypto industry.

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Additional reporting by Hannah Murphy

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