Photo: Al Drago/Bloomberg via Getty Images

At 4:11 p.m. Tuesday, Stefan Coolican’s phone started lighting up. It was WhatsApp — the crypto chats he was in were getting all worked up because, finally, an exchange-traded fund for bitcoins was coming to the U.S., making it much easier for Americans to buy the cryptocurrency in their brokerage or 401(k) accounts. “Everybody was sending this tweet sent by the official SEC account,” said Coolican, a former investment banker who has since co-founded Noble, a crypto technology company. “Today the SEC grants approval for #Bitcoin ETFs for listing on all registered national securities exchanges,” it read. Below the statement was a photo of Gary Gensler, the chair of the Securities and Exchange Commission, next to a bland government-speak statement about transparency, efficiency, and regulation. Coolican checked the price of bitcoin — up about 2.5 percent to about $48,000, nice — then went back to work. After all, the approval process had been going on for months, and the announcement wasn’t exactly a surprise.

About a half-hour later, though, Coolican noticed his phone was going off again. “There was a mountain of messages,” he said. That tweet? Fake. The SEC — which has sued many companies over lax cybersecurity standards — had its social-media account hacked. (X reported that two-factor authentication had not been activated on the account.) Gensler disavowed the tweet. The price of bitcoin had already cratered back down to the $45,000 range. Did the SEC get hacked? Did Gensler? Why was the price crashing? What was going on?

“The chaos is back,” Coolican said. And for many in the crypto set, it couldn’t have come back fast enough. In the weird world of digital assets, 2023 was a long, boring year, defined by reckonings, investigations, and criminal convictions — nothing like the fun, money-minting, head-spinning pandemic years that (briefly) made crypto a $3 trillion juggernaut. The advent of bitcoin ETFs — essentially, a way for the crypto-curious masses to conveniently, and more safely, invest in digital currencies — was supposed to be a signal event in the maturation of the market, a time when BlackRock and Fidelity would come in to be adults in the room. Instead, as the deadline for the SEC to approve the ETFs has gotten closer, the undomesticated nature of the crypto markets has reared its head again and again, for better or for worse, as it got closer to legit.

On Wednesday evening, the SEC actually, for real this time, approved 11 applications for bitcoin ETFs. The decision came after a decade of warnings — not only from Gensler, but also from his predecessor, Jay Clayton — that the crypto markets were too prone to manipulation and therefore shouldn’t be more widely accessible without addressing those risks. In his statement on the approval, Gensler again raised those issues. “While we approved the listing and trading of certain spot bitcoin [exchange-traded product] shares today, we did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto,” he said. What happens from here on out is anyone’s guess. The investments are supposed to be the first step down the digital-currency rabbit hole for the 401(k) class — a segment of the population with approximately a gazillion dollars but roughly zero bitcoins. To detractors, the ETFs are a Trojan Horse, a way to smuggle a manipulable Ponzi scheme to everyday investors. But to the faithful, they’re merely a more familiar package for an investment that already got wildly popular on its own, and this is just a way to show holdouts that there is really nothing to fear about it.

To some, chaos is its own reward. “How to trade this? Damn,” Joe Cox, head of business development at crypto hedge fund Valmar Capital, texted me shortly after the Tuesday SEC tweet debacle. Valmar makes money not by betting on the direction of any particular digital currency, but by taking advantage of price swings in different markets. Just last week, Valmar had made a roughly 12 percent margin — an eye-poppingly large profit, at least before fees — by selling bitcoin futures contracts that hadn’t caught up to a rapid decline in the price of spot bitcoin, he told me. (In human terms: The price of an actual bitcoin had fallen quickly on January 2, but the market for futures — contracts to buy bitcoin tied to those prices, but which sometimes lag — was lagging behind.) “For most of 2023, volumes from volatility were supremely muted,” he told me. “We really started seeing a lot of that come back towards the end of August.” Since there are fewer big traders doing these kinds of trades, all while there’s rising optimism for crypto, he said, he’s been able to pick up more profitable trades like that. (Cox said that Valmar was “market neutral” when the hacked tweets went up, but he traded some ethereum in his personal account.)

While nobody knows if there will be a return to the days in 2021 when ugly-ape JPEGs were selling for the price of a nice home, what’s clear is that, now that the ETFs are approved, the race is on to flood more money than ever into digital currencies. No fewer than six of the ETFs had teaser rates of zero percent fees. Rumors have been swirling about how many billions of dollars the institutional giants like BlackRock have waiting on the sidelines for their first day of trading.

To Coolican, the nature of the chaos from here on out is different than what it was in the past. “This is a Rorschach test. People see what they want to see. Some see this as such an immature industry, rife with manipulation,” he said. The chaos this time, he noted, was aided by government incompetence. “This was the SEC’s account that got hacked. If they didn’t take the proper security precautions, that’s a serious issue.” On Wednesday, the regulatory agency didn’t return a request for comment about the hack, or whether it was really true — as an official X safety account had said — that two-factor authentication hadn’t been set up on the account. (As recently as October, Gensler personally tweeted that companies should do that to keep their data safe.) It has, however, said that it is working with the FBI to investigate the hack, and what motivated it. It might be too much to say that the regulator holds all the blame for the fake tweet — after all, they didn’t hack themselves. But even with Tuesday’s false start, the SEC appears to have given cryptoworld something that might be even better than an ETF — the ability to say that, for once, they aren’t the only chaotic ones.

This story was updated to include remarks from Gensler and note that the SEC is working with the FBI to investigate the hack.