The cryptocurrency market experienced a whirlwind of activity following a false tweet from the official Securities and Exchange Commission (SEC) account, which led to a rapid surge and subsequent drop in Bitcoin’s price. This market manipulation, resulting from a security breach, has reportedly caused significant financial damage, with estimated losses running into millions.
On January 9, the SEC’s social media account on X (formerly known as Twitter) fell victim to a hacker who spread fake news that the spot Bitcoin ETFs had been approved. The unauthorized tweet, which was later confirmed to be false by SEC Chair Gary Gensler, led to a short-lived pump in Bitcoin’s price, followed by a swift crash. Some are even going as far as buying X followers in order to make accounts look more official.
The crypto community reacted quickly to the news, with speculation and conspiracy theories circulating on social media platforms. Many industry observers demanded transparency and questioned the SEC’s security protocols. Notably, pro-crypto Wyoming Senator Cynthia Lummis called for clarity, stating, “Fraudulent announcements, like the one that was made on the SEC’s social media, can manipulate markets. We need transparency on what happened.”
In an update on the situation, X’s Safety team revealed the findings of their preliminary investigation, reporting that “The compromise was not due to any breach of X’s systems, but rather due to an unidentified individual obtaining control over a phone number associated with the @SECGov account through a third party,” as detailed by CoinDesk. The team also highlighted that the SEC account did not have two-factor authentication enabled at the time of the compromise.
The price of Bitcoin spiked to $47,680 when the tweet went viral but quickly slumped to $45,415 within an hour after the tweet was debunked. The incident not only impacted traders but also raised serious concerns regarding the SEC’s preparedness to handle such disinformation threats.
Representative Bill Huizenga responded to Gensler’s announcement of the fake tweet with a degree of irony, “Does this mean we can blame more of the @secgov’s horrible rulemaking and so-called regulation by enforcement on a ‘compromised account’?“, reflecting the frustration felt by parts of the crypto community towards the SEC’s regulatory approach.
The incident has exposed vulnerabilities in the SEC’s social media security practices and has led to an outcry for improved safeguards to prevent similar episodes in the future. The SEC has since stated that it will work with law enforcement and government partners to investigate the matter and determine the next steps relating to the unauthorized access and any related misconduct.
This security breach and resulting market turmoil serve as a stark reminder of the influence regulatory news can have on the cryptocurrency markets and the importance of robust security measures in preventing market manipulation.
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