Ep 14 - July 17, 2024 - ETH ETFs launching 7/23

Welcome to another episode of the weekly crypto check-in recorded on July 17, 2024. I'm your host Robert Swartow. I'll be joined by my co host Andres Sanade. How's it going, Andres?

Hey, Robert. Going well. Man, it is hot and humid here in Atlanta. How are you?

Doing good. It that and, it's been a while. We've took a hiatus here between our 2 different travel schedules, so it's tough to get together. So, we're back at it, and, we got a lot to talk about.

I was gonna say, wow. It's been, to say the least, an eventful couple of weeks, but definitely good to be back on and good to see you.

Yeah. Awesome. Well, let's just dive in here. So, first up is, Morgan Stanley will be approving supposedly, ETFs on their platforms for their platforms by the end of August. You know, this is I guess a bit of more of the same here as you start to see these platforms, initiating, the ability for their advisors to sell it, to clients.

Well, yeah, more so down, right, if if we're focused on the performance side. Well, you know, one data point I'll have for next week's call tonight, I'm attending a dinner in Buckhead with about 30 advisers, family offices, and, one of the 4 fund managers that's gonna be presenting in the dine around format is Bitwise, which, as you know, we've talked about this, is one of the one of the initial issuers of the, you know, BTC ETFs. So I'm sure with the pending launch of Ethereum ETFs and this big approval and others in the pipeline, you know, it'll be good to hear Matt Hogan's take on, you know, flows into, into Bitcoin ETFs and other related crypto, products, particularly from FAs over the next year or 2.

Yeah. Absolutely. It's, you know, we we've gone over this so many times, but it's it's surprised everybody. And, I think another way to illustrate just how much it surprised people is kinda leads into our second point here. So the Bitcoin ETFs collectively are about 16,000,000,000 of AUM. Eric Balchunas, I always forget how to say his last name, but, From Bloomberg. Yes. From Bloomberg. Yes. He he was been all over the top of this and then news reporting since January on these ETFs.

Yeah. Well, he's he's gotten into the forecasting game now and because the because the audience size is probably dramatically bigger, than maybe some of his earlier ETF tweets and reports, particularly when it comes to social media, you know, outlets like, formerly Twitter. You know, you put numbers out there in this this asset class, and it I don't know. It gets it just evokes a lot of reaction. So Right.

It it's it's, it jokes it evokes the emotional side of most crypto investors.

Well, I'm curious what what what his prediction is on Ethereum ETF flows, which I know is our next topic.

Yeah. It's our next topic. I haven't seen him mention anything. If anything, he's been, I think, learning along the way. He's obviously not a crypto expert, but he is either holding back or doesn't know what to say. And we could talk about that here.

Yeah. I think we talk about the next point, which is that ETH ETFs are expected to launch, you know, late, you know, later, in July, 7 7 23. So, you know, I I would love to hear, number 1, your take on the timeline because I know we saw additional comments requested by the SEC. But in light of what we just talked about, with, with Eric b, we'll call him from Bloomberg Yeah. I'd be shocked if the forecast or prediction is in the tens of 1,000,000,000.

Right. You know, I've often joke, advisors may or may not understand Bitcoin, but at least they know how to say it and spell it. Most people don't know how to say Ethereum correctly, certainly don't know how to spell it, and can't tell you what is good use what what is good use cases are. There's a lot of learning there. There's no 32nd elevator pitch.

Yeah. And, you know, I I haven't followed this particular launch as closely. How many issuers, are are bringing in e ETFs out,

out

of the there was

I know there was, 9 app 8 or 9 applications. I don't know if they've all made it through. I haven't paid close attention to that part. As of today and tomorrow, assuming as of today, they're supposed to be filing their final s one, so we'll get tickers. We're gonna get fees.

means they're not a yield play. Correct?

Correct.

Yeah. Yeah.

So they're purely just like you're you're diversifying away from Bitcoin potentially into having 2, but, basically, their function is following the same music. Yeah.

Yeah. Yep.

So, you know, Hester Peers was quoted yesterday. She's one of the commissioners. The SEC was saying how, you know, she's always open to the idea of evolving these products to be it's changed to cash redemption so it could be in kind or, allowing in this case, Ethereum to have some some the ability to do staking and then have a yield on it. That's not gonna happen with Biden administration. I'll say it right now.

Right. Well, seriously, a lot of questions with respect to the ETF and and, like, what what's the next 6 months look like. I think we have that in general with the election and just all the uncertainty there, and ongoing developments, but also with respect to the, you know, ETFs. Yeah. You would think an advisor that wants to recommend an allocation to crypto is probably gonna be asked by a client, like, I heard about ETFs.

Lots lots of stuff to resolve. And, admittedly, they have a lot of education that they need to do, in in, I guess, I wouldn't say short order, but they need to get on it in some level. Because their younger client base is gonna be the ones asking about it. The older ones, they won't be much. So Yeah.

I I my my takeaway from the $16,000,000,000 distribution, headline is, number 1, I think everybody would probably vomit if they saw the amount of fees that were paid to all the various parties that needed to be in involved in the bankruptcy. Like you said, the lawyers, the accounting firms, the valuation firms, bankruptcy advisory firms. I mean, it's it's it's probably pretty sickening. And then there's been a lot of horse trading, and and just really betting on the bankruptcy itself by a lot of institutional investors who, you know, who bought claims for pennies, on the dollar and are gonna make, you know, they're gonna make good good money on those bets. Now they unlike a retail investor who had 5 or $10,000 of retirement assets or or savings part, they have capital and time and arbitrage is a mandate that, they can go and buy this.

Yeah. I mean and, admittedly, if you really do the math, yes, they were able to claw back some assets and liquidate some assets that, FTX owned themselves to kinda get

to this

number, by also waiting and kind of allowing the fees to accrue of sorts, you, the market corrected enough to be able to allow them to sell some of these assets Yeah. The tokens to get to this number. So, you know, it's it's it's a double edged sword there, but it's, you know, fascinating to kinda watch because it's again, it doesn't happen in normal bankruptcies. You you get pennies on a dollar. You don't get made whole. So

Right. Right.

Yep. Our next topic, is back on the, Gensler SEC lawsuits thing. But this one's different. This is Coinbase has filed suit against the SEC to get access to Gensler's private emails because they don't feel like what he's saying publicly and what he's writing privately are the same. Yeah.

I mean, it's a it's a point in their finger in the chest, if you will, of of, you know, the the agency and the agency's de facto face, and its leader, at least for now, right, through the end of this administration, as is typical as you outlined yesterday. So

Yep.

Yeah. Look. Throw the haymaker, see see where it lands, see how it lands. And, I I just think it's fascinating. I mean, these lawyers that are working on behalf of Coinbase, and I'm thinking the lawyers sitting there at the SEC and their counsel, it's like, I know all these people play golf together on the weekends. You know? It's just, it it's it's maddening. But here we go. That's the way it is. Yeah.

And it's just that they didn't take I I dug real hard to find something.

I know. I know. So, well, the house the house of representative failed to override the veto of SAB 21.

Yeah. They bumped it 2 consecutive days, the votes, and then and then it didn't happen. I mean, immediately, I think it was maybe a little bit too optimistic to think that they could override it. Because they had a majority before, but they didn't have a super majority they were gonna need this time to get it done. So this is something that you know, again, if there's a new administration come January, this is probably one of the first couple things that probably gets cleaned up.

Well, to to suggest that there haven't been major, political and, you know, events happening in DC with the assassination attempt on Trump and now the RNC, all the talk over the last month about is Biden gonna stay in the race. Like, it just seems like many things came to a halt with respect to momentum maybe that we thought we were gonna see at the beginning of the summer. I mean, it's just a lot that's transpired over the last month. So

Yeah. Yeah. Absolutely. And this vote happened last week, So this was predates the Yeah. You know, the assassination attempt. But, you know, it does seem like the momentum is a little bit slowed. I think part of it is because congress is back in their districts. They're not actively doing anything. So there's a lot less stuff getting drummed up. It'd be my read on the situation.

It it's it's getting close to August. Right? So we're we're, like, deep into the summer. And, yeah, when they get back from fundraising, recess, it maybe it rears its head again. Yeah.

But, but again, they they won't truly be in the, the depths of a political season, from there till November. So Sure. You know, at the end of the day

So Goldman yeah. This next one, Goldman Sachs, obviously, you know, when a firm like Goldman Sachs, a sort of traditional Wall Street investment bank launches 3 tokenization projects. That's a worthy headline.

Yeah. So threw this in here because not because they're saying specifics about it, but this more so just showing that, like, you know, some of these well regarded firms as you're mentioning are really starting to, like, talk publicly about things that they're thinking about and trying to do. I'm sure more details will come. This I believe this is supposed to happen, in late q three, early q fours from my reading. So we got a ways to go, but, like, my guess is it follows a similar model that you're seeing JPMorgan do with their crypto.

Well, yeah. One one thing about the, you know, the likes of a Goldman, their, you know, their their employee headcount, I haven't looked

It's huge.

You know, recently. But it it's not only is it huge, but the number of folks in technology roles in in engineering and in mathematics and in, you know, areas related to AI and quant, machine learning, data. You know, a lot of people probably think about a Goldman Sachs as a traditional m and a shop that arranges, you know, financing, takes companies public. And, certainly, you know, they're they're high up and always have been for for it seems like eons when with respect to the lead tables in traditional investment banking business, you know, they tried to go into wealth management. They tried to go into doing more consumer related financial services.

the middle of it. So Yeah. Well, it'll be fascinating to watch. And, you know, it it I I just think it's, you know, an interesting thought experiment from time to time is like, it it's great that they're doing this. What firms are not doing this or not or way behind the curve?

Right. Well and and, you know, the the it sort of challenges the fundamental premise of I bought the airline seat, so I bought capacity on Right. The the air the airplane. Yes. Because I can't make it, why should I not be able to transact with somebody who can make it?

how that one evolves. So our, next topic, and I will say it upfront. I'm gonna try my best to try to keep politics out of this podcast for the next 6 months. Good luck. Yes. Yeah. It's tough. Yeah. But I I think it's important to kinda bring it. I'm bringing this point up because you you're seeing such a difference between the way the Democrats are handling crypto and the way the Republicans say they want to handle crypto.

a former VC as well. So, I mean VC. Right? Absolutely.

Yeah. So, I mean, from a tech intersection. So That's right. And then Yeah. He also holds, at least on its closure about $250,000 in Bitcoin. So there's obviously personal motives to see it go up, and maybe that's why he cares about those things. But it's, you know, Trump is gonna be one of the keynote speakers at the Bitcoin conference that's happening this week in Nashville, among many other big names in Italy.

And and and Trump's campaign, I mean, announced, I think it was earlier this week that they had raised 20 +1000000 in crypto donations. So yeah. I mean, you're right. Like, it when you hear the narrative around digital assets and crypto, the Republicans seem to have taken, you know, taken the mantle. Mhmm.

Absolutely. Yeah. It's a, you know and I I guess to be fair to the Democrat side, I will say that Trump, his SEC chairman so that would have been Jake Clayton. He's the one that started the lawsuit on his second to last day or last day in office, against Ripple. So there there's some negative there.

only other yeah. It it a lot does depend on the election clearly. When it comes to crypto, I think the next four years are gonna see even more change, and I would say the consequences and the opportunity versus the prior 4 years are even more, more are are likely to have more of an impact on the future of financial markets, capital markets. And I think that the leadership in DC, the ship in the regulatory agencies, and that obviously starts at the White House and their posture is gonna dictate a lot. You know, that there's all there's always that saying, you know, people underestimate what someone can do.

They they they could be, and I will say with the caveat that, admittedly, it has to be not the democrats moving forward for the next 4 years, in control.

Well, you you hope that yeah. We don't see 4 more years of of what we've seen, right, enforcement by regulation and go offshore, and we're gonna try to score political wins in the near term to move voters, but then really have, no no appetite for innovation

Right.

When it comes to the executive branch. So

it should

be which would be bad, you know, for the space.

For sure. For sure. And, you know, I've heard rumblings of, you know, if if it's if it's another 4 more years of what we currently have, a lot of crypto companies will be planning packing up and moving offshore, and just kinda riding off the US, which is pretty sad to think that in a technology, you know, US is largely viewed as a technology country. Like, we can now get our shit together. So

Yeah. That we would miss that opportunity to to lead this industry. Right. Yeah. For sure.

Cool. Well, our The last

one, I was intrigued when you put this in, the update. So I'm gonna let you talk about it, but I'll read it. So the is the Bitcoin security model broken? So a headline of sort of a theoretical question. Tell us what you what what you're thinking, and what the implication is here.

Yeah. So Bitcoin is an asset that largely is viewed as a digital goal. So it doesn't really do much. You can transact in it. Yes. But it's not efficient for that. There's better networks. So we'll set that aside and say that's not really the point of it. Up until this point, the way that miners get interested in running their hardware and doing all the hard work that is the bit running the network is they get rewarded for it. They get rewarded in fees.

Yeah.

And then it becomes truly fees. The miners could decide that's, you know, they're not willing to do the work. So that starts jeopardizing this is where the whole word security comes in in that in that phrase. The whole security model is the network's highly secure because there's lots of computers doing lots of math. They're competing for the same rewards.

be how how they might innovate.

You know, for fees and just a lot of other use cases. But, you know, for the biggest asset in the asset class, I don't even know what the current percentage of the total market cap Bitcoin is, but it's probably still over 50%. It it starts to make you wonder. And all the Bitcoin proponents, they're like, oh, we need we need people to buy Bitcoin. I'm like, why?

It's a question about if if I if I sort of paraphrase liquidity Mhmm. The in this case, security and the benefit, that the technology promises is a non anonymity, decentralization, digital gold, etcetera. But without participation in that market, you lose those benefits. Correct. And in the in the case of a buyer and a seller, we saw what happened in 2008 to asset prices when, right, there was no bid.

Yep. And, you know, because that's that's a true marketplace. You know, there's the miners on one side and there's the users of the network on the other. And, you know, they kinda, in some ways, need to be, like, in a harmony, of the full amounts, and all that. So Yeah. Awesome. Well, I

think I don't know. Maybe we need to take 2 weeks between these calls because there was a lot to cover, but, I guess I guess the takeaway is we'll we'll see you next week. I'm I'm you know, if it's like anything last week, there's gonna be a lot more to talk about.

Yeah. Well, hopefully, we have, it's a little less dramatic over the next week. Be great.

Oh, to say the least. Yeah.

For sure. Well, thanks for joining us on this episode of the weekly crypto check-in. If you wanna stay updated on future episodes, you can find us on any podcast player by searching Teton Crypto Capital or weekly crypto check-in. Take care. Take care.