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00:00:01
Off Chain 6/22/23: TradFi is Coming for Bitcoin
295 Plays1 year ago
In this week's episode, we cover the following stories:.
- There’s been a slew of news relating to major institutions that typically operate outside of crypto, entering the space more aggressively with their own crypto products.
- Fed Chair Jerome:Powell: Bitcoin Has 'Staying Power' as an Asset Class
Recommended![CBDCs: The [Dark] Future of Money (Part 2 of 2) image](https://media.zencastr.com/cdn-cgi/image/width=112,quality=85/image-files/61fc0461fb20e00040aeb09e/5b9f1396-2a8e-418d-82a0-30fd00969266.jpg)
Transcript
Introduction and Bitcoin Price
00:00:12
Speaker
Hello and welcome to the Decrypting Crypto Podcast. It's June 22nd, 2023, and this is Off Chain, your weekly recap of the biggest stories in Web3. I'm Matthew Housebarbie, and I'm here as always with Austin Knight. How are you doing, Austin? I'm doing well, Matt. Bitcoin is up. Should I be happy or should I be scared? I don't know.
00:00:34
Speaker
Well, we broke through we broke through 30k. Things have been going pretty good on on ETH. I feel pretty good because I think I mentioned a few episodes ago that I was largely out in in cash and
00:00:50
Speaker
My ETH limit orders at 16.50 triggered and I am largely in ETH right now. So it's been a nice rise of about 15% in about four days since me doing that limit order. So that's nice. So I'm feeling good. I'm feeling pretty great about that. So which is a first. So yeah, no.
00:01:16
Speaker
It feels like there's a lot of positivity around. We're going to be talking about this, right?
BlackRock's Bitcoin Spot ETF Announcement
00:01:20
Speaker
And a lot of it is, I feel like the eternal question of when are the institutions arriving? Well, they haven't arrived just yet, but I think there's a lot of positive news around this piece. And surprisingly, Jerome Powell coming in with some positive comments on crypto. So we'll dig into all of that. Let's jump into our first story of the day.
00:01:52
Speaker
There has been a slew of news relating to major institutions that it's worth calling out, typically operate outside of the crypto space.
00:02:03
Speaker
entering the space more aggressively with their own crypto products. So unless you've lived under a rock over the past couple of weeks, you probably have heard the news that BlackRock has filed for a Bitcoin spot ETF. This is very, very important and is major news. Nothing has been approved right now, but
00:02:30
Speaker
As a listener, you'll know that, I mean, me and you Austin been, it feels like we've been talking about the grayscale Bitcoin investment trust for a couple of years now and their consistent failure of converting that into a spot ETF. Most recently, was it December that they last kind of tried or it was around around that time. Right. Yeah. And, um, now BlackRock.
00:02:58
Speaker
One of the largest, if not the largest financial institution in the world is filing for a Bitcoin spot ETF.
Understanding Bitcoin Spot ETFs
00:03:06
Speaker
What does this mean? What is a spot ETF? Well, the long and short of this is that it is an investment vehicle that means that institutional investors can get exposure to Bitcoin effectively for all intents and purposes by Bitcoin, but not actually buying it without having to hold Bitcoin.
00:03:27
Speaker
You can, ETFs are often used to get exposure to large baskets of securities. Like for example, you want to get some exposure to the AI space. Instead of buying individual AI stocks, you can buy an ETF that gives exposure to a basket of AI stocks. In this respect, this will be an ETF that tracks the spot price of Bitcoin and
00:03:57
Speaker
This is incredibly important. And the fact that BlackRock are the ones that are leading the charge on this is particularly positive. Why am I so positive about this? Well, BlackRock has a pretty good success rate in getting ETFs over the line. In fact, with the SEC, so they're doing this in the US, they filed this application for a spot ETF.
00:04:23
Speaker
They've, in their history, put through 576 ETF applications. They failed to get one of those through historically with the SEC. So it feels like we're batting with the winning team right now. And you can only imagine that BlackRock have really, really
00:04:50
Speaker
thought through this approach and are only found when they feel very, very strongly that they can get this over the line. I don't think it's any surprise that they have picked this opportune moment while the crypto native financial institutions are facing huge headwinds from the likes of the SEC and otherwise.
00:05:12
Speaker
So great news on BlackRock. What's happened after this? Well, it's kind of been a snowball effect. WisdomTree, who I think has around 85 billion in assets under management, nowhere near as big as BlackRock, but still sizable. They actually have a number of ETFs. I think one that I had exposure to a few years ago was the cloud computing ETF that the WisdomTree has. They have also
00:05:38
Speaker
now filed for a Bitcoin spot ETF. Its wife also calling out, they've tried this twice before and failed. And a lot of that, the narrative was around like fraud concerns, things like this. Now for them to jump back in off the back of this makes it seem like they're feeling pretty confident. It's not just wisdom tree. Invesco has done this. They've reactivated its application for a Bitcoin spot ETF. They first filed this in the fall of 2021.
00:06:05
Speaker
but they've since reapplied this in light of BlackRock leading the charge.
Fidelity's Potential Moves in Crypto
00:06:10
Speaker
You can kind of see the confidence this has given other traditional financial institutions. Here's one that I think is most interesting, Austin, Fidelity. We all know Fidelity, one of the biggest asset managers in the world.
00:06:23
Speaker
They're yet to actually make a move, but it's rumored. It feels like it's a matter of days, probably until we get the official that they are also filing for their own Bitcoin spot ETF. Fidelity have been a great ally actually to the crypto space for, I think like since 2016, to be honest. But here's what's interesting. The rumor mills have been kind of swirling with
00:06:52
Speaker
potential acquisition of Grayscale's Bitcoin Investment Trust, that would be a huge move for Fidelity. And all of this news it's worth calling out has actually created a huge surge in the value of Grayscale's Bitcoin Investment Trust shares. So if anyone did take the gamble on buying the GBDC shares back in December when I think they were trading at
00:07:20
Speaker
a 40% discount on Nav. Probably feel like a pretty good trade right now. So all of this is happening. Probably by the time we actually finish recording, there'll be another spot ETF application. I expect lots of this happening. We've also alongside this Deutsche Bank, you know, that tiny German bank. Well, it's seeking a crypto custody license in Germany right now.
00:07:50
Speaker
And alongside this, a new crypto exchange, EDX Markets, which I actually don't think it manages custody of assets right now, but I think it's trying to move towards that. This is a new crypto exchange that's just launched backed by Fidelity, Charles Schwab, Citadel. It's only open to US institutional investors, and I think they can kind of trade organic exposure to Bitcoin, Ethereum, Litecoin, and VCash right now.
Timing in Crypto Market Entry
00:08:16
Speaker
This has all happened in like the past 10 days. It is just a flood. This is the kind of thing that we've been really waiting for. It's kind of a shame, though, that this has coincided with so much pressure on the companies that are actually building crypto natively in the space and driving this forward that it feels like it's kind of battling against them. But hey, I'm not complaining.
00:08:44
Speaker
I don't think it's an accident at all on the timing of the traditional financial institutions deciding to take advantage of this opportunity. I don't really buy the whole
00:09:00
Speaker
this was a coordinated effort. Now look, a lot of this is worth calling out. I've seen loads on Twitter where it's like, oh, like people saying like, you know, BlackRock did this so that they could buy Bitcoin for cheap before and now like loadout is like, BlackRock are not doing that. That is not what BlackRock do. And I do think, you know, things like Coinbase getting sued by the SEC,
00:09:29
Speaker
We've known this for a long time. They've had a Wells notice for ages. This has been in the works. BlackRock probably had the heads up on it. But I don't think that they're in kind of some conspiracy with the SEC on this. I think this is just pretty wise timing from these institutions. I think they've been sitting waiting for a long time for the right moment.
Impact of BlackRock ETF Approval on Crypto
00:09:51
Speaker
But what this means net net for the industry is if the BlackRock spot ETF
00:09:59
Speaker
gets approved, which is going to take some time, that will probably be one of the single most bullish events for Bitcoin since the existence of Bitcoin. I think it's just unquestionable, though it opens the doors for huge amounts of capital flow from major asset
00:10:22
Speaker
asset companies that will be able to gain exposure and invest in Bitcoin. Liquidity, there'll be this huge rush of it. I think we're starting to see the early optimism of that reflecting in Bitcoin's price at a very micro level right now. Will that last? I'm not so sure. But if we start to see this stuff come to fruition,
00:10:46
Speaker
Yeah, I think that's the kind of cycle making event that can be very, very good for the space. What's your take on this, Austin?
Skepticism on BlackRock's Intentions
00:10:56
Speaker
You know, I will admit that so any time I've seen institutions come into the space, I've defaulted to positivity and optimism because I totally agree with you. I think that ultimately we do need traditional banking and investments
00:11:14
Speaker
financial institutions to adopt the technology in some form in order for it to really make its way to the mainstream, which is ultimately what the ambition for this tech is.
00:11:26
Speaker
Um, this time it felt weird to me and it could just be coincidental, but I find, I just feel that there are very few coincidences with BlackRock in particular. I think the other names on the list, none of them would have spooked me, but seeing BlackRock get involved, it just feels odd. And I know that they've had like this sort of horrible smear campaign against them over the past few years, almost to the likes of like a Monsanto.
00:11:50
Speaker
that probably it's a little bit more extreme than the reality. But I am very close to somebody that is a former BlackRock executive. And I spent 12 days in Chile years ago with a former Monsanto executive. And in both cases, it turned out, I know, very, very bizarre. It was a coincidence. But in both cases, it turned out that as they would sort of
00:12:19
Speaker
As they, as you talk about it and they mount their defense, like, I mean, it's not that great of a defense. So I would say that my skepticism has kind of held strong. And, um, you know, you mentioned like 575 to one ETF success rate with the SEC. I I'm under no delusion that BlackRock, you know, doesn't have, uh, inroads, um, with the SEC. So.
00:12:43
Speaker
Do I think this is like full-blown collusion or something like that? No, but the timing just really creeps me out because you see the sort of newcomers, the innovators like Coinbase and I mean many, many, many other entities that we've talked about over the course of the past couple of years being attacked by
00:13:07
Speaker
the SEC. And then right as those attacks are really, really mounting and starting to get serious to the point where it's almost like, wow, what is even the future for crypto in the US? You see the institutions start to swoop in. So yeah, it is curious to me.
00:13:27
Speaker
open to the idea that it could ultimately be a positive thing. But I would say I'm maintaining a healthy degree of skepticism. You know, at the same time, and this is totally unrelated, but just to sort of give some context to this, this skepticism, it was also just announced that BlackRock will be in charge of a half a trillion dollars for investment to rebuild Ukraine.
00:13:52
Speaker
Yeah, I did see that. Yeah, it's just it just is slimy, man. It doesn't feel right. So, yeah, I would like I said, you know, I think that there are certain names on that list that probably probably the timing would have still crept me up, but not to the degree of when you start to see like the Black Rocks and the Fidelity's and the Deutsche Bank. But we'll have to see, you know,
00:14:20
Speaker
Yeah, I think one thing's for sure. If this goes through, capital will be flowing into the space. That's true. Yeah.
Jerome Powell on Bitcoin and Oversight
00:14:28
Speaker
All right. Let's jump into our last story of the day. Relatedly to our previous story, Fed Chair Jerome Powell has recently been quoted as saying Bitcoin has staying power as an asset class. You mean known crypto advocate, Jerome Powell?
00:14:51
Speaker
This is what I'm talking about, Matt. Why is he saying good things now? What's happening? It's so strange. Yes. So on Wednesday, the semi-annual hearing on monetary policy was held by the House Financial Services Committee. And there Powell said that the US central bank should play a, quote, robust federal role in overseeing stablecoins.
00:15:16
Speaker
He also remarked that cryptocurrencies like Bitcoin have quote, staying power. So that's interesting. He has said to his credit, a couple, I would say neutral to slightly positive things about crypto. In the past, there were a couple of quotes in 2021, 2022 that I was able to dig up on this. But this is maybe the strongest signal that we've seen out of him.
00:15:46
Speaker
It went on, so Maxine Waters started asking questions about stablecoins and he responded, quote, we do see payment stablecoins as a form of money and in all advanced economies, the ultimate source of credibility in money is the central bank.
00:16:06
Speaker
Well, I think it is actually even just positive that they're saying, you know, it's it's positive. It's it's positive. Yeah. But I do. I do hear that. Yeah, I do. You know, I mean, what this shall I translate that statement? Yes, please do. We we love CBDCs. This is what he's saying. That's exactly what he's saying. Yes.
00:16:27
Speaker
But yeah, then he went on to say that we believe it would be appropriate to have quite a robust federal role in what happens in stablecoins going forward. So that was the alley. That was the you. Yeah, I see. Yeah. So you can read between the lines there. And then I also thought this was interesting. So Maxine Waters raised some concerns that the Fed would be, quote, hamstrung.
00:16:49
Speaker
to do anything if stablecoin issuers could register directly with the states because there is some legislation going around that would permit this. And Powell said, quote, leaving the Fed with a weak role and allowing a lot of private money creation at the state level would be a mistake. So, okay, he's saying that stablecoins and crypto have staying power. But if you continue
00:17:14
Speaker
to listen to what he's communicating what he's really saying is the reason it has stable or staying power is because we are going to be in control of it right the also trustworthy central bank.
Shifts in Market Share Due to SEC Actions
00:17:27
Speaker
And yeah, as we mentioned, you know, Bitcoin is hovering around the 30K mark. I think that's primarily because of what's happening in our previous story with the institutions. But it did see a pop yesterday after the House Financial Services Committee, you know, had these hearings.
00:17:48
Speaker
Meanwhile, Binance US market share has all but disappeared following their SEC case. It fell to 1.5% down from 8% at the start of this year. And actually Coinbase has also fallen to 50.5% down from 56%.
00:18:06
Speaker
So what's happening? Exchanges like LMAX, Bitstamp, and Kraken are making gains. So we can see the impact of the SEC cases against finance and Coinbase, and then also the impact of Fed signaling and institutions getting involved. So it's a very dynamic time, I would say. I think so. And I think that, you know, it's
Future of Crypto Regulation in the US
00:18:31
Speaker
It's a time right now from a US perspective of a lot of really mixed signals. I do think that the US from a crypto perspective is going to look a lot different even in just 12 months because it feels like we're on the precipice of a lot of change. It's like tectonic shifts that are kind of happening. We need to see where kind of the land ends up. You know, it creates a lot of friction along the way, but it's
00:18:57
Speaker
that there's kind of max pain in areas, and then there's areas of real optimism. And what we see happen in the US, across the rest of the world in Europe, the UK, like other big financial areas like Hong Kong,
00:19:13
Speaker
they're building and setting the rules, the legislation, whether you like it or not, right? Like that they're actually like forming these. And I think they're going to be looking to what happens with some of these like ETFs with the lights of BlackRock and co, as we mentioned in previously, to, you know, once they're given the green light, they're going to be given the green light across all these other regions, we're going to then start to see, I think, in 12, 18 months time,
00:19:41
Speaker
the first really big push around CBDCs. So we'll be talking a lot about that. I think right now it's a very interesting time. You know, Austin, I'm just happy that my coin gecko portfolio looks green for the first time in a while. I'll take it. Thanks, Jerome. I'll take it.
00:20:03
Speaker
All right, that's all we've got time for today. We'll be covering all of the latest and greatest in the wonderful world of crypto, Austin. I'll see you next week. Talk to you then, Matt.
00:20:35
Speaker
The contents of the Decrypting Crypto podcast should not be used and are not intended as investment advice. Please do your own due diligence before making any investment, cryptocurrency or otherwise.