Ep 23 - October 2, 2024 - Hamburgers

Welcome to another episode of the weekly crypto check-in recorded on October 2, 2024. I'm your host Robert Swartout. I'm joined by my co host Andres Hinnate. How's it going, Andres?

Hey, Robert. Good. It's fall here in Atlanta, though, today. It feels like it's back to summer. I'm, yeah, I'm going out to Phoenix today. So, I guess it was a little bit of a preview of what to expect over the next 4 days in the

in the valley. Warm up. Yeah.

It is hot.

Well, they don't they won't have the humidity, so you'll get the heat without the humidity. Sweet.

Yeah. They say that. Right? It's the dry heat. Well, how how have you been?

Doing pretty good. I was, out of town last week, out in Idaho. Got to enjoy some rather cool weather out there. Fall is definitely in swing out there. Aspens are changing colors. It's rather beautiful at this point. But back here in Atlanta, doing another episode. How you been?

Well, we, yeah, we didn't do last week. I was on fall break. I was, in Florida on the gulf, and, man, thoughts and prayers go out to all those folks affected by Helene. We, we avoided a direct hit. You know, we were on the gulf between Pensacola and Panama City, and we were we were, like, I would say, an hour and a half, you know, west of Big Bend, Florida where it kinda hit, and Mhmm.

Yeah. Yeah. We don't have to talk about the hurricane the whole time, but one thing that I learned is Asheville had the exact same thing happened to it a 108 years ago. And, like, there's a memorial in downtown Asheville, I believe, kind of moralizing that, you know, the people that lost their lives and that kind of stuff. And, like, it totally got washed over and messed up. I'm just kinda like, this is kinda crazy to see how it's something exactly the same thing happened twice. So Wow.

Albeit Well, a lot of news to cover as we said, back, you know, with 2 weeks. Certainly lots of action from our friends at the SEC, and an exciting development with XRP at the end, a little preview of what's to come.

Yeah. So let's jump in here. You know, our our buddy Gensler that, you know, heads up the SEC, while he's apparently no longer gonna be saying crypto asset securities, he seems to have adopted a a something similar where he refers to crypto so called exchanges. Like, what what else are they if they're not an exchange? Like, it it's just like, he just finds ways to poke.

Was this in a, oppressor, or was this something that that he came out and gave comments? Because I know he gave comments at a recent, Fed conference that we'll talk about here shortly.

I don't know the exact context. I believe it was around that same time that the Fed thing that you're referring to is likely there, but I I don't know for certain.

I always wonder if these regulators and officials, you know, if if what they're reading you know, obviously, it's been reviewed by lawyers. It's been reviewed you know, thinking about, like, the Fed. You would assume. Right? Yeah.

Yeah. So,

you know So so called exchanges. Yeah. So we've got more to talk about with so called exchanges. Yes. We do. Yes. But hamburgers are in the news. Yes. You're on buying hamburgers. Is this, like, the pizza thing?

It may turn into a bit of a meme like that. In this case, Trump was, doing a, campaign stop in New York City, I believe, and he stopped at a famous hamburger place. I forget the name of it offhand, but he went in and bought hamburgers that they they knowingly already took Bitcoin, so he went in there. Obviously, he's playing to to the base that he's trying to attract that is the crypto voter right now.

No. This is like the famous bar in Manhattan. Like Yes. Yeah. This is like the most famous bar in Manhattan. It's all crypto native, you know, guys and and gals. I think this is, unless he went into 2 pubs or 2 restaurants, but I Okay. I know he made an appearance and he paid in he paid in Bitcoin.

Paid in Bitcoin. The part that I find hilarious is there's It's an $800 hamburger. Probably. Well and then maybe by the end of the year, it could be more, because the you know, Bitcoin price goes up. But the what I find really funny about this whole, situation is, you know, he has assumed some kind of staff that are helping him trying to operate his wallet on his phone, to pay in Bitcoin.

Right. Right. Well, you know, he has made a lot of public appearances of late, right, given Mhmm. You know, just given the attempts on his life. Right? We had, what, a month ago, 3 weeks ago, like, the incident in his golf course in Palm Beach, and then, you know, the so that's the second one. But he's getting out. Right? And and Yeah. You know, this is another example.

Yeah. You know? And, you know, in a lot of ways, big credit for him, even outside of his politics. Like, the guy has been shot at twice or well, shot at once, potentially shot at the second time. And the idea that he's still willing to go out in public, a lot of people I think would be hunkered down at home trying to figure out how never to go back outside again. Yeah. So you guys

credit to him. Sure. Well, smoking gun, Silvergate. I know Silvergate was in the news sometime back. So Yep. So we'll do a little bit of, recap of history here. So Yeah.

We're gonna

do a history lesson.

Spring of 23, and this is when bank failures were happening. This is when, Silvergate went down. This is when, Silicon Valley Bank went down, and the third one would have been wait. I think it offhand. Not important. But Silvergate in this case,

is It was a big crypto bank. They were a

crypto bank. Almost all their customers were crypto focused company. Businesses funds and things like that. Yeah. They were very specialized. They were following for all for everything that I've read, they were not breaking any laws, regulations, anything like that. They were following all the KYC email, doing the things they were supposed to do to operate a business. Yeah. This is when Operation Choke Point Choke Point 2.0 went into place and started running. And Silvergate wasn't the first.

Yeah.

And it's crazy to kinda see all this come out. There was rumor that they, you know, didn't have funds and there was all sorts of, you know, what didn't be Innuendo and right. Right. Yeah. And flood for that matter. And it's just now it's coming out in court cases, and this is, like, so sad to see a business is blown up because of political, beliefs and all that good you know, all that bad stuff effectively. So

yeah. So they had assets at the at when the smoke clears, because you knew there was gonna be and maybe there will be some hearings on this. Who knows? I mean, often not, this stuff gets swept under the rug, in a way. Right?

Yep. You know, what's crazy is when we were in the moment, they kept, you know, the regulators and everyone's kept saying, oh, this is not crypto focused. You know, it felt like it to the ones, like you're saying, to the ones on the inside. Now you fast forward to today and you see this stuff is a 100% crypto focused. And the way to kinda illustrate that was is when these banks, these 3 banks in particular, went into, I think, receivership effect.

And on the heels on the heels of that, we saw all this other activity that was happening in the background. Right?

Right.

There was somewhat of a purge, I call it, right, where you saw the finance and you saw FTX and you saw also, you know, these exchange traded products, and funds were in the process of going I mean, there was a lot of things happening Yeah. When you go back and study those 2 years. Right? And we're still in it. Right? We're still very much in it with an election. But, yeah, there was definitely some casualties.

Yeah. It was, a lot of collateral damage back then, and for the most part, that's behind us. It didn't make it on our, actually, no no. It didn't. We'll get to FDX here in a few minutes, so I'll I'll say.

Right. As

of this last summer. So

Yeah. So Well, we can't yeah. We we we can't, all have just bad news about, our friends at the SEC or or our grumblings. You know, one positive development,

over

the last couple of weeks is the SEC approved options for BlackRock's, you know, Bitcoin spot ETF. Yeah. I know. Let's unpack what that means because that's a lot. Yes. Anytime additional financial products are created, what my takeaway is you're allowing new market participation. You're allowing, additional, expressions, from market participants of their view on an asset. Right? Maybe it's leverage. Maybe it's I I wanna be long.

I think so, but this is where my knowledge really gets fuzzy, I'll I'll admit. I'm not, like, most up to date on these kind of products. I the first thing that I wondered when I saw it was, you know, does this per present an, a situation where a lot of options get sold, people want them delivered, and then the market, makers in those case have to go to the market to get Bitcoin? If they can't get it, is this functioning like a rehyperification of Bitcoin to the point where, like, there's a run on the bank? Not that there's a bank in this case, but, like, there's a Right.

A bank of New York, a a Citigroup, a Chase. Right?

A JP. Anything like that. Yeah. Yeah. So because no Fed that can go and bid more Bitcoin. Right? Mhmm.

That

basically is her point. So I don't know if this starts getting in that territory, but it definitely starts to feel like it to me, as a layman. And, hopefully, it never gets there. I'll say that upfront, but, you know, this is, I guess, further evolution and integration of crypto into the traditional financial system in my opinion. So

Yeah. I, yeah, I would just add to it. I think that's a very fair fair point. And I think from a regulatory and I I'd say just financial market health standpoint, I think it's worth understanding the implications of, of of options for BlackRock's, you know, Bitcoin ETF. I do think that there are a lot of folks out there that speculate in Bitcoin or that are, you know, more institutional, trading asset management focused.

Yeah.

Hopefully not taken too far.

Yeah. Agreed. And this is not necessarily exactly on this point, but we were talking before we started recording. So about the BlackRock ETF. So Eric from Bloomberg was saying now, you know, he looked at the top 10 biggest ETF launches of this decade, so since 2020.

Yeah. The market adoption for sure on the Bitcoin side. Yeah.

It has been incredible. So will this help fuel more of that? I mean, options on top of it. I don't know. It'll be interesting to see how it how it affects the market. I can see it adding volatility to the Bitcoin price, for sure. So Yeah.

I mean, there's 2 theories. I mean, one is you'd think with more market adoption, they these spikes that we see in volatility in certain crypto assets, right, would start to minimize. Right? And and I think there's a lot of academic research and probably asset managers, you know, that have put out a lot of research around this. And a lot of investors are okay with volatility of the upside.

Yeah. So all 5 commissioners, were in front of the committee for the first time collectively, since 2019. So it's been a while.

Yeah.

A lot's happened. Ag and Gensler wasn't in, in that seat. It was, Jay Clayton and all that stuff. But it was, I watched the hearing. I don't generally watch hearings, but I watch this hearing. Good for you. After the fact, I admitted it was

Oh, okay.

I I didn't set my I didn't set my, my, alarm for it. I'm not that crazy, but it was fascinating to watch. So Patrick McHenry That's a beat. I was gonna say. And he in his opening remarks, he referred to the SEC as a rogue agency. So, like, that set the tone. Set

the tone. Right.

And they were there for more than just crypto. It was the SEC there. It wasn't the SEC crypto there, to be clear. But, man, like, you could you have 5 commissioners. So you have Gensler and 2 democrat appointed ones, and you have 2 republican appointed ones.

it kinda make it begs the question. Right? Like, we're not regulators, so we're not inside the room when they're discussing, let's just say, key key priorities. Right? The regulators are there to, you know, enforce or put it not enforce, but put in place, they get a mandate from congress.

From their standpoint, I would say it's not all republic and democrats. I mean, the, the gentleman from New Jersey or New York, I forget his name. I'll probably remember here in a second, but definitely Democrat when it comes to how he votes typically, but, like, ripped into the SEC about how they're dealing with crypto. Like Yeah. Much like many of the Republicans did.

news, whether it's considered news or it was more of a tweet. Speaking of the f SEC and Gensler, that is Mark Cuban, the former owner of the Dallas Mavericks? Yes. I don't know who's behind this, but they're floating this idea that he would be interested potentially in, you know, being the chair of the SEC of Trump. I'm not sure I I'm not sure how real that is, but Mhmm. Certainly got a lot of headlines in crypto land.

Yeah. So I I remember seeing that tweet, and I forget who to credit it to. The rumor is even if Kamala gets re gets elected, Gensler's gone. That that sounds like that's, maybe he I've heard that. He's had ambitions to wanna be the Fed chair. I don't know if that's gonna or the Treasury Secretary, excuse me. But we'll set it all aside. Say we need a new SEC commissioner and it's Kamala that's elected, To think that it's Mark Cuban,

this is what it's gonna be. Yeah. It's gonna require a Trump win.

Well, if Trump wins, there's no way it's Mark Cuban. Because Mark Cuban has been very anti Trump. I I just can't Oh, is he anti Trump? Okay. He's been very anti Trump. He's been tooting the Kamala horn for Gotcha. Couple weeks pretty heavily. But the idea that the guy that was sued by the SEC would go and then work for the SEC, it's, like, doesn't seem like a match made in, I don't know, Washington heaven. But

Yeah. Yeah.

It's just ironic at best. So I don't know. We we we will Interesting. See how that

This is this is not crypto check-in news quality, so we'll get off the the gossip and innuendo. We'll get back to the FTX estate. There's been some big checks cut here, out of this estate. The FTX bankruptcy, of course, is Yeah. Progressing through, the bankruptcy process, and now folks are starting to get paid. Whether they were the original, claimants or they bought claims in bankruptcy, you know, process. Yep. What's what's your take on the distributions in this So

it sounds like they're just starting, like, in the last couple days. Not everyone's got their funds. The the little bit that I've seen on Twitter is roughly $16,000,000,000 will be distributed. It's a lot of money. Yeah.

Yeah. Any coincidence? I know you have a little bit of a a conspiracy theorist, streak in you. Yeah. Any any coincidence that distribution start, right after Caroline Ellison is sentenced to 2 years in prison? I'm just curious. I mean, maybe it's heard that.

That's

No. No. Maybe it's totally coincidental, but I saw that last week, she she got hammered with 2 years. Whether that's the right number or not, I know you felt strongly that, SPF should have gotten a 100 years and ended up getting, you know, getting a

a license to send you that. You can convince me that he got her sentence, and his yeah. I should have been much more. But, no one asked

me to. She's going away for 2 years. I don't know how much time she'll serve, but I know we have another headline, in here about, you know, a prisoner being released.

But, yeah, you know, it's the FTX estate, I mean, once that money gets distributed, it it's a bit of closing the chapter. Right? Like that year 2022 and all the craziness that happened, it'll be nice to finally put that behind us. And, you know, again, investors are getting made whole to what the funds value that they had back in November of 22. They missed all the run up of last year, but Sure. And and part of this year for that matter. But it's

Well, there's a lot of there's a lot of hedge funds that did did very well in this trade because they bought claims for I would own them if they bought them for pennies on the dollar, but I think, you know, they probably bought them for between, 20, 30, 40 cents on the dollar, and they're gonna they're gonna make out whole. So once again, you know, the big money, smart money, quote, whatever you wanna call that money.

That that

money Yeah. Patient money. They, yeah, they came out. They some of them, anyway, that participated here came out, pretty good pretty pretty good place. So I think in terms of headlines, though, the one that I was most excited about this week is this next one about, you know, BNY Mellon, and they're approved for crypto custody.

So we're gonna talk about I know it's certainly not the oldest business in the country, but it's pretty high up on that list.

240 years is pretty old. Yeah.

Right. It it almost predates the country somehow. But, you know, they were they're the largest custodian in the world. I think everyone probably knows that. But they got approved by the SEC to custody crypto. And up until this point, banks could not custody crypto because of Saab 121. We've talked a lot about this in the podcast over the summer. It was Yeah. Almost got, repealed. Biden vetoed it, and then the override did not happen or it did not succeed.

Right. $60,000,000,000,000, you know, firm in terms of assets under custody or administration. I mean, ahead of even State Street and Yeah. You know, Citigroup. These these are these s you know, these these sizable global institutions, too big to fail by every standard.

Mhmm.

Many of which those institutions have not fully embraced crypto. And those advisers are doing it, but they're doing it, you know, more personally as evidenced by the fact that Matt said a year ago and 2 years ago when he asked by a show of hands how many you own crypto personally, he said 10 to 20% of the hands went up in the room. This year, he asked by a show of hands how many of you own crypto personally. He said he estimated 70% of those advisers in the room said they own crypto. And it would make sense if you're an adviser that you're you're probably gonna you're probably a smart one anyway, a big one that's got a $100,000,000 family client.

Yeah.

XRP. Now they're willing to look at some of the other things. So Right. It's interesting.

I definitely think there's a trickle down effect. I think what we haven't talked about in the b and y thing, which we won't we don't answer to now, is how much of it how much of this is a threat to Coinbase? Because Coinbase is like basically the custodian for almost all these ETFs outside of Fidelity. And obviously that could affect Coinbase's stock and all sorts of stuff, but long term, it'd be interesting to just kinda see where these things shake out. So

Yeah. Yeah. And maybe they're a candidate to be acquired as one of these big institutions says, you know what? We've been kind of behind on crypto. We find ourselves behind all of a sudden. Like, look at Intel. Look at look at the look at the Intel story with NVIDIA and chips. Right? Yes. I mean, I I know for myself, like, 10 years ago, I hadn't heard of NVIDIA.

So

Correct. Yeah.

Yep. So next topic here, this will be brief. So October 7th is the last appeal date. So I'm referring to the Ripple SEC case. So around I don't think it's exactly, August 2nd, but around that date, that was when the, Judge Torres gave her final judgment ruling.

Yeah. Yeah. Well, I we we can't skip over the second to last bullet because Okay. Okay. CZ gets released from prison. CZ is still the largest shareholder of Binance. You know? I don't know if he's officially the chairman or doesn't have an official title. He's no longer the CEO. But he still has the largest shareholder, so he's financially still gonna do very fine, doing doing well. Yep. He gets out of prison 2 days early, I heard, because of the weekend.

And Yeah. And it fell on the weekend. I know.

I know it's normal, but I it's just ironic that, like, the guy gets a short sentence for, right, his thing, and then it's like, okay. We're gonna let him out on a Friday because it's kind of like, we're not working Saturday Sunday to process prisoner releases. Right.

It it it does not. Like, you you think they spend all 7 days keeping people in? They could use all 7 days letting people out. I'm like, why can't we let

the guy go on Monday at 6 in the morning? I mean Right. Come on. The dude I mean, it's just Yeah. It it it you know, I know this happens every day, and I'm not making light of, you know, the the prison system and all that.

Well, the last thing I'll say about CZ here is

Oh, you got something on CZ. Okay? I have something

that, didn't make in the notes, but the so he started tweeting the next day. Right? He's like, good morning. He did his whole normal thing. And then, at one point he said, oh, I'm, you know, I'm happy to see that Binance is doing well, and he he's trying to start up an education company of some kind, some startup.

You know, one thing to think about here is they they have a platform, Bitwise. I don't know the entire business, but having sat there in their offices, they do more than just ETFs. Right. Right? So, you know, when when you're out there and you're talking to institutional investors and you're, talking to advisers and you're speaking to, you know, rooms full of people like they are about this new asset class Yeah.

Mhmm. If you

look across what's happening in the industry, you know, those that have the resources and the means for distribution, product development, etcetera, and they have brand, like and they can deliver a customer experience. They're they've got a lot of tailwinds at their back right now. And so for me, like, I'm looking at this and saying, yeah. This is obviously great for somebody that's into crypto and digital assets. I love to see more of this happening.

Yeah. It'll be interesting to see. And I was just trying to remember, we talked about it maybe 2, 3 episodes ago about how one of these, issuers had, filed for a product that was gonna be an index. Do you remember was that Bitwise? Do you remember offhand?

I don't. I don't remember offhand.

We'll have

to go back and look that up.

This may have if it was Bitwise, this makes total sense now. Right? I mean, like, if you're gonna have an index product, you need to probably have more than 2 things in it. Yeah. And, you know, this being the 3rd. So, obviously, they have a lot of work to do here. They have an SCC to be convinced, that this needs to be something the market, can have access to. And admittedly, there's a lot of drama at the SCC around XRP.

Yeah. All the technical history of that.

So, hopefully, that doesn't come into the the the calculus of this, but it wouldn't surprise me if it does. Yep. So awesome. Well, thanks for joining us on this episode of the weekly crypto check-in. If you want to stay updated on future episodes, you can find us in any podcast player by searching Teton Crypto Capital or the weekly crypto check-in. Take care.