It was the moment that 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 granted approval for the launch of spot bitcoin exchange-traded funds.
The SEC had been expected this week to rule on whether as many as 14 different money managers would be allowed to issue the ETFs, which would allow everyday investors to get exposure to bitcoin without having to own it.
Fifteen minutes later, SEC Chair Gary Gensler declared that message to be both "unauthorized" and inaccurate. In his own message on X, Gensler said 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 over just a matter of minutes.
An SEC spokesperson said shortly after the incident that the unauthorized public message on X "was not made by the SEC or its staff."
The agency offered more explanation hours later, saying in a statement that it determined there had been unauthorized access on the agency's @SECGov X account "by an unknown party for a brief period of time shortly after 4 pm ET" and that the unauthorized access "has been terminated."
"The SEC will work with law enforcement and our partners across government to investigate the matter and determine appropriate next steps relating to both the unauthorized access and any related misconduct."
The communications mishap was the latest drama in a market frenzy surrounding the potential approval of these ETFs, which could expand widespread acceptance of the world’s biggest cryptocurrency and make bitcoin a potential staple in 401(k)s, IRAs, and pension plans.
Speculation surrounding these products helped push the price of bitcoin up more than 150% in 2023. The cryptocurrency rallied again to start 2024 as investors became more optimistic the applications would be approved.
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Three of these applicants told Yahoo Finance earlier Tuesday they expect the SEC to approve their applications sometime Wednesday and that trading could begin as early as Thursday based on that timing.
One of these potential issuers said it was in contact with the SEC following Tuesday’s message mishap and it still expects to be declared effective around roughly 5 p.m. ET Wednesday.
One longtime crypto backer, Anthony Scaramucci, pushed back on Gensler's explanation of the Tuesday communications mishap.
"I think Gensler is lying," he said on X. "I bet an employee screwed up and jumped the gun and he is blaming it on X."
The applicants include some of the biggest names on Wall Street, 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 money managers create and redeem shares of their new funds.
"We believe the [spot bitcoin] ETF is going to be an incredible tool for unlocking whole new pools of capital employed into bitcoin," Riot Platforms CEO Jason Les told Yahoo Finance. "This is a rising tide that will lift all boats of the industry."
Gautam Chhugani, managing director of the research arm for AllianceBernstein, said his team estimates such financial products will garner $10 billion or more in investment flows through the end of 2024 and "hundreds of billions of dollars" over a two-year period.
That, he added, will help push bitcoin’s price even higher.
Bitcoin is still far from its all-time high of $68,789 set in 2021, a year it benefited from a period of low interest rates and fiscal stimulus that put excess savings in the pockets of investors.
The market crashed in 2022 as rates rose and the giant crypto exchange FTX collapsed, before digital assets made a comeback during 2023.
Bitcoin’s surprising surge last year coincided with optimism about the arrival of ETFs due to a filing by BlackRock and a court decision in favor of another ETF applicant, Grayscale Investments.
The SEC has in the past denied such applications, arguing the products were vulnerable to market manipulation.
The regulator is also the industry's most prominent 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 also can be exceptionally risky & are often volatile. A number of major platforms & crypto assets have become insolvent and/or lost value. Investments in crypto assets continue to be subject to significant risk."
The bull case for 2024 is that many of crypto’s biggest problems are now officially in the rearview mirror after the criminal conviction of FTX founder Sam Bankman-Fried and a guilty plea from Binance CEO Changpeng Zhao.
Investors are optimistic the industry is poised for wider acceptance and regulatory clarity from Washington.
They are also excited about bitcoin’s "halving" in April, a once-every-four-years event that reduces the daily issuance of the cryptocurrency by half — and typically results in another bull run.
Any interest rate cuts from the Federal Reserve in 2024 could also boost demand, as could accounting changes expected in December that will make it less adverse for large corporations to keep crypto on their balance sheets.
"We do think that bitcoin goes to $150,000 by 2025," Chhugani added.
David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto, and other areas in finance.
