NEW YORK - Bitcoin dropped to around US$45,000 before paring losses after a false post on the US Securities and Exchange Commission’s X account claimed that the agency had approved the issuance of ETFs holding the digital asset.
The regulator on Jan 9 subsequently said it had not yet granted approval of spot-Bitcoin exchange-traded funds and that the X account had been compromised.
Market participants were caught off guard by the cyber-security incident. The SEC is widely expected by analysts to announce a decision about the ETF applications on Jan 10 in the United States.
Bitcoin traded at US$45,660 as at 9.35am in Singapore on Jan 10. The largest digital token had surged to a 21-month high of more than US$47,000 the previous day as optimism grew that approval of the long-sought ETFs was imminent.
“That was not on my bingo card for today,” said Ms Ophelia Snyder, co-founder and president of 21Shares, which is seeking to offer a Bitcoin ETF with ARK Investments. “I don’t think it will affect the process or what comes next. There’s no way after 10 years of work, this could wrap up without any last-minute drama.”
Plot twist
The ARK 21Shares application must be addressed by the SEC by the end of Jan 10.
Analysts expect the agency to approve several applications at that time, following a slew of last-minute adjustments to official offering statements this week.
“Just add this to the long list of surprising plot twists and turns in the 10-plus year effort to bring a spot Bitcoin ETF to market,” said Mr Nate Geraci, president of The ETF Store, an advisory firm.
SEC chairman Gary Gensler has repeatedly argued that crypto is rife with fraud and misconduct.
The agency cracked down on the sector after a 2022 rout and collapses such as that of Sam Bankman-Fried’s FTX exchange.
But the SEC in 2023 lost a key legal fight against crypto asset manager Grayscale Investments, spurring speculation that the regulator will have to acquiesce to the spot ETFs. The spat was over the US$29 billion (S$38.6 billion) Grayscale Bitcoin Trust’s desire to convert into such a product.
Bitcoin has rallied 162 per cent over the past 12 months, fuelled by anticipation that the proposed ETFs will make the token more of a mainstream investment.
But some analysts wonder whether Bitcoin is ripe for a pullback if and when SEC approval finally lands, since speculators may decide to bank profits.
The false post on the SEC’s X account was up for a number of minutes before the agency clarified that it was inaccurate. In that period, Bitcoin posted a relatively modest jump to almost US$48,000 from about US$46,700 before falling back towards US$45,000.
IG Australia market analyst Tony Sycamore said: “Bitcoin’s drop after the false SEC post shows the risk of an eventual ‘sell-the-news’ reaction to spot ETF approval, but much depends on where the token settles after the latest volatility.”
If Bitcoin is trading in the US$46,000 to US$47,000 range before the announcement, there could be a burst to US$51,000 after the ETF green light before the pullback begins, he said.
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