Did the fake Bitcoin ETF announcement prove that the SEC approval was a “sell-the-news” event?

On Tuesday evening, the US Securities and Exchange Commission (SEC) said that her X/Twitter account was hijacked to falsely claim that she had approved highly anticipated Bitcoin exchange trade funds (ETFs), leading to this caused the price of Bitcoin (BTC) to skyrocket and then slide.

Meltem Erdam is CoinDesk Turkey's cybersecurity columnist.

In a now-deleted tweet, the financial regulator incorrectly announced: “Today the SEC is authorizing #Bitcoin ETFs to list on all registered national securities exchanges. The approved Bitcoin ETFs are subject to ongoing monitoring and compliance measures to continue to ensure investor protection.”

The tweet was quickly removed. SEC Chairman Gary Gensler confirmed that the news should not have been distributed and that no authorization had been granted.

While the incident certainly raises concerns about how the SEC secures its social media accounts and what safeguards are needed to prevent market manipulation in the digital age, the biggest question the fake tweet raises is how the market will react will be approved when a Bitcoin ETF is ultimately released.

This fake tweet allowed us to see how the market might react, which may have been the point of the trick.

Bitcoin price rose to $47,900 immediately after the initial tweet and then fell 1.5% to $46,247 after the news was debunked.

A lot is riding on these funds, and the market has spent months (if not years) waiting for the SEC's decision on a series of spot Bitcoin ETF applications in the US. Although industry speculators are confident that an exchange-traded fund will be approved, the SEC, known for its anti-crypto stance, could reject the applications again following this incident. The commission is expected to make a decision by Wednesday.

Bitcoin is up 164% over the past year following the market crash from the end of 2021, thanks in large part to growing hype around ETFs. While there are legitimate reasons to believe that spot Bitcoin ETFs will bring capital to the sector, many speculate that the timing of approval will be a sell-the-news event.

Spot Bitcoin ETFs offer investors the opportunity to participate in Bitcoin's price movements without having to purchase the cryptocurrency directly. There are currently 13 live applications in the US, including from Wall Street giants like BlackRock, VanEck and Fidelity, as well as a number of crypto-native companies. The funds own the actual Bitcoins and issue shares that track the price of the coins – similar to any other ETF that can track commodities, stocks and/or indices.

If spot ETFs are approved, it will be easier for a wider range of investors to speculate on Bitcoin, including large companies looking to incorporate BTC's volatility into their portfolios. In other words, these funds could bring crypto into the mainstream, hence the anticipation and trading before SEC approval or rejection.

The SEC generally takes a hard line on cryptocurrencies, although its recent legal defeat against Grayscale, which has filed to convert its massive GBTC trust into an ETF structure, has greatly boosted the industry's hopes of approving such a product.

If the agency gives the green light, the next question will be how much capital ETFs will attract in the early days and years to come. It also remains to be seen how long the speculation surrounding spot ETFs will continue.

There is some irony in the fake Bitcoin ETF announcement moving the market, as the main reason for the SEC's refusal to approve a Bitcoin ETF is the potential for market manipulation. After an investigation, X said the SEC account was hijacked “because an unidentified individual gained control of a phone number associated with the @SECGov account through a third party.”

It sounds like the number associated with the account has been switched to the SIM card. We were also told that two-factor authentication was not enabled.

While this hack isn't exactly what the SEC likely had in mind when it raised concerns about the ETF applicants, SIM swaps are common in cryptocurrencies. In fact, this is one of the most common ways people lose their cryptocurrencies. CoinDesk Turkey's article on preventing SIM swap attacks can be found here.

Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers