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News/Bitcoin Takes a Rollercoaster Ride After False ETF Tweet

Bitcoin Takes a Rollercoaster Ride After False ETF Tweet

Van Thanh Le

Jan 11 2024

6 months ago5 minutes read
A cartoonish chibi cubic robot with a surprised expression, capturing the sentiment of the SEC's impact on crypto

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UPDATED: Later, on January 10, 2024, the SEC greenlit 11 spot Bitcoin ETFs, including those by Bitwise, Grayscale, and BlackRock, marking a significant shift in the crypto landscape. 

This approval, after a decade-long journey since the Winklevoss twins' initial 2013 filing, reflects the industry's evolution and readiness for institutional-grade challenges. Key advancements include sophisticated custodian methods, segregated cold storage, and advanced market surveillance mechanisms. 

The ETFs, however, still require effective S-1 forms for trading to commence. Expected inflows are substantial, with Valkyrie anticipating $200-$400 million for its ETF and Bitwise projecting a $72 billion market within five years. This milestone aligns with the 15th anniversary of Hal Finney's "running bitcoin" tweet, symbolizing a full-circle moment for the crypto community.

Following the SEC's approval of spot Bitcoin ETFs, Bitcoin's price exhibited volatility, initially dipping to  $45,600, then bouncing back to surpass $47,500 before staying above $47,000 at the time of writing.

chart.webp

A Tweet, a Plunge, and a Million Theories: Bitcoin's Rollercoaster Day

Starting January 9 night (UTC), Bitcoin's value showcased its volatility, reacting dramatically to a tweet from the SEC's account. The tweet, falsely claiming an approved Bitcoin ETF, sent Bitcoin soaring from roughly $46,600 to a crest of $48,000—a two-year zenith—before it cascaded down near $45,500. The aftermath saw the price graze a low around $44,828, mirroring the market's heightened sensitivity to ETF-related news.

The core of the turmoil stemmed from the SEC's Twitter account, which unexpectedly heralded the Bitcoin ETF approval. This post, later revealed as a result of a compromise, fueled a transient surge in Bitcoin's value. Amidst this chaos, the crypto world buzzed with theories ranging from an SEC misstep to a deliberate hack, further intensified by the SEC and Chair Gary Gensler's swift reactions.

sec btc.jpg
Source: X/ @SECGov

This incident has triggered an extensive investigation. The SEC, grappling with the fallout of over $210 million in liquidations—$135 million from long positions and $67 million from short positions—is probing the breach. This event not only stirred the crypto waters but also cast a spotlight on the SEC's fluctuating stance on Bitcoin ETFs, a point underscored by financial commentator Charles Gasparino's remarks on the SEC's hesitancy.

This episode has not only highlighted the crypto market's fragility, reacting sharply to news and rumors, but also has intensified the scrutiny on the SEC's pivotal role in overseeing digital assets. Questions loom large about how the SEC will navigate its future path in the realm of digital currencies.

Social Media Misfire Rocks Crypto World as SEC Account Hacked

The Securities and Exchange Commission (SEC) found its social media account hijacked, sparking immediate turmoil in the cryptocurrency world. In the evening of January 9, just past 9 p.m. UTC, a rogue post falsely announced the approval of spot bitcoin ETFs, prompting a “swift” clarification from SEC Chair Gary Gensler.

The SEC is now working hand-in-glove with law enforcement to unravel the details of this breach, focusing on how unauthorized access was gained and the motives behind this deceptive post. This incident isn't just a blip on the radar; it has sent ripples through the crypto industry, which is keenly awaiting the SEC's verdict on several spot bitcoin ETF applications.

The political arena has taken keen notice. Senators Bill Hagerty and Cynthia Lummis, of the Senate Banking Committee, didn't mince words in their demand for transparency and a high standard of accountability from the SEC. This call to action mirrors the exacting standards the SEC itself upholds.

Digging deeper, investigators uncovered a SIM swap attack at the heart of this security lapse. This sophisticated cyber ploy, involving the takeover of the SEC's phone number linked to its social media, exposed a startling oversight: the lack of two-factor authentication, a basic yet critical safeguard.

Not surprisingly, the incident has drawn sharp criticism from blockchain luminaries and public figures alike, including Elon Musk. Their concerns center around the SEC's operational security and the broader implications of such breaches on market integrity.

In Washington, Senators J.D. Vance and Thom Tillis have added their voices to the chorus of concern, penning a letter that underscores the severity of the SEC's security mishap and demanding thorough explanations. This growing legislative scrutiny brings to the fore critical questions about the SEC's cybersecurity protocols and its capacity to protect market-sensitive information.

SEC Hack Exposes Holes in Cybersecurity, Ignites Congressional Scrutiny

The breach's timing also raises eyebrows. Stuart Alderoty, Ripple's Chief Legal Officer, pointed out the irony in the SEC's failure to adhere to its own four-day disclosure rule for significant cybersecurity incidents. This lapse in transparency, he argues, is at odds with the expectations set by the SEC itself.

Further investigation into the incident uncovered that the SEC's compromised 'X account' was lacking basic security measures, notably two-factor authentication. This revelation is particularly jarring, given the SEC's stringent security demands on other entities.

The breach has led U.S. lawmakers to demand a full investigation and answers from the SEC. Key questions linger: Was this an inside job? What are the implications for the SEC's decision-making process?

In an ironic twist, Coinbase, America's largest cryptocurrency exchange and currently embroiled in a legal tussle with the SEC, stepped up with an offer to bolster the Commission's cybersecurity. This move, amidst their ongoing conflict, highlights the complex interplay between regulators and the regulated in the realm of digital security.

With a January 23 deadline looming, Senators are pressing SEC Chair Gensler for a comprehensive explanation of the breach. The incident has catalyzed a wider debate on the cybersecurity protocols of regulatory bodies, their influence on market stability, and the overarching implications for investor confidence.

Bitcoin's Wild Ride: From Twitter Hacks to Institutional Buys, Traders Brace for Volatility

The cryptocurrency witnessed a dramatic surge towards the $48,000 mark, a leap triggered by a tweet from a hacked SEC account. This sharp rise, however, was met with an equally swift rejection at this threshold, laying bare the market's volatility and its acute sensitivity to news.

The repercussions of a hoax involving the SEC's Twitter account further rattled the Bitcoin market. The aftermath saw a massive $2 billion worth of Bitcoin moving to exchanges, highlighting the market's vulnerability to misinformation and the fickleness of investor sentiment.

STHs-1536x864.webp
Source: Glassnode

Despite these fluctuations, Bitcoin remains a strong long-term bet, as evidenced by the astonishing fact that 90% of its holders are in profit. This enduring value stands in stark contrast to the short-term market vicissitudes.

IntoTheBlock-BTC-1-1536x490.png
Source: IntoTheBlock

On-chain data reveals another intriguing trend: Bitcoin miners have begun offloading their holdings, hinting at a potential market correction. This activity is a significant barometer of market mood, particularly among key stakeholders.

CryptoQuant.png
Source: CryptoQuant

Meanwhile, Coinbase has become a hub of increased buying activity, especially from institutional investors. This surge in interest points to a bolstering of confidence in Bitcoin’s future.

In a bid for stability, Bitcoin traders are increasingly turning to protective measures against potential price declines, such as buying put options and selling call options, reflecting a cautious market sentiment.

However, amidst Bitcoin's recent rally, concerns loom over a possible price correction. The absence of a significant pullback thus far, coupled with high unrealized profits among short-term holders, signals that a market adjustment might be on the horizon.

Bitcoin Holds Its Breath as ETF Deadline Approaches

Bitcoin, on its part, has been on a remarkable journey, soaring over 60% since early October. This rally is primarily fueled by the expectations surrounding ETF approvals. In a bold forecast, Standard Chartered projects an inflow of $50 billion to $100 billion into Bitcoin ETFs by 2024. Complementing this optimism, Deribit’s Bitcoin volatility index (BTC DVOL) witnessed a descent from 73% to 63%, indicating a stabilization in market sentiments.

The debate over Bitcoin's price reaction to the ETF approval continues, with analysts from QCP Capital pointing out the crypto's resistance to breaking past the $48,000 mark and the lack of upside volatility. Predictions vary, with some anticipating sideways movement or even a correction towards $35,000.

Meanwhile, Tether is making strategic moves of its own. The recent addition of 1 billion USDT to its Treasury has boosted the market liquidity. Historically, such minting activities have often been precursors to price increases in cryptocurrencies. 

Tether's market capitalization, now exceeding $94 billion, reinforces its stronghold in the market. Furthermore, large transfers of USDT to exchanges are being interpreted as groundwork for an impending bull run, with the timing of these transfers often aligning with significant market events.

Conclusion

The false tweet from the SEC's compromised account caused significant turbulence in the Bitcoin market, leading to substantial liquidations and a heightened focus on the SEC's role and cybersecurity measures. This incident underscores the crypto market's sensitivity to news and the importance of robust digital security in regulatory bodies.

FAQs

1. What triggered the recent volatility in Bitcoin's price?

The volatility was sparked by a false tweet from the SEC's hacked Twitter account, falsely claiming the approval of a Bitcoin ETF. This led to a swift increase in Bitcoin's price, followed by a notable decline.

2. What was the impact of the SEC's Twitter account hack on the market?

The hack resulted in over $210 million in liquidations, with $135 million from long positions and $67 million from short positions. It heightened market sensitivity and raised questions about the SEC's cybersecurity measures.

3. How are lawmakers responding to the SEC's cybersecurity breach?

U.S. Senators, including J.D. Vance and Thom Tillis, are demanding a full investigation and transparency from the SEC. They are scrutinizing the SEC's digital defenses and its capacity to safeguard market-sensitive information.

4. What trends are emerging among Bitcoin traders in light of recent events?

Traders are increasingly buying protective put options and selling call options, reflecting a cautious sentiment. There's also a surge in buying activity from institutional investors, particularly on Coinbase.

This article has been refined and enhanced by ChatGPT.

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