In this week’s episode, the gang is back together. Michael’s 1 and 2, Jason, and Vance dive straight in to discuss the Grayscale Spot Bitcoin ETF Ruling. The guys then review where we are in the crypto cycle, and touch on Uniswap’s lawsuit dismissal and StarkWare’s wallet plunder. The fellas finish out on a ‘Hot Takes’ segment, where the guys get spicy on macro!
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Timestamps:
(00:00) Introduction
(00:35) Grayscale Spot Bitcoin ETF Ruling
(06:04) “Permissionless Promotion”
(06:57) Greyscale Spot Bitcoin ETF Ruling
(29:44) Cryptos Cyclical Framework
(33:14) Uniswap Lawsuit Dismissal
(40:26) Dianne Feinstein Lawsuit
(41:36) StarkWare Wallet Fiasco
(46:26) Hot Takes Segment
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Resources:
Grayscale Ruling:
https://blockworks.co/news/grayscale-sec-spot-bitcoin-etf

Uniswap Lawsuit Dismissal:
https://blockworks.co/news/uniswap-class-action-dismissed
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Disclaimer: Nothing said on Bell Curve is a recommendation to buy or sell securities or tokens. This podcast is for informational purposes only, and any views expressed by anyone on the show are solely our opinions, not financial advice. Mike, Jason, Michael, Vance and our guests may hold positions in the companies, funds, or projects discussed.

All right, everyone, welcome back to another episode of Bell Curve.

Before we jump in, quick disclaimer, the views expressed by my co-host today are their personal views, and they do not represent the views of any organization with which the co-hosts are associated with.

Nothing in the episode is construed or relied upon as financial, technical, tax, legal, or other advice.

All right, everyone, welcome back to another roundup of Bell Curve.

You guys just want to launch right into GBTC.

It's a big week, big legal victory week for crypto overall, continuing a trend I think that was set by the XRP decision.

And we actually had 2 big wins this week.

1 was GBTC and the other was Uniswap, which flew a little bit more under the radar, but I think was almost equally as important.

So maybe just to kick things off with the GBTC decision.

So the high level is the US Court of Appeals struck down the SEC's denial of a Bitcoin spot ETF.

So what this doesn't mean is that we're immediately getting a GBTC Bitcoin ETF and that conversion is definitely going to be successful.

But what it does mean is that the SEC now has to go back and review Grayscale's proposal again with the court's ruling in mind.

And what was specific about what was what makes this a win, I think, for crypto is that the SEC was or the court rather was incredibly specific about the rationale for why the SEC had to go back and review the SEC's decision.

And from my understanding, not a legal expert here, but they really boxed them in.

And in particular, what they focused on was the link in between the spot and the futures markets.

So that close link, they pointed out in kind of plain English, something that I think many people had been thinking about all along, which is how does it make any sense in the world to have a futures ETF approved, but not a spot ETF?

There's a great line somewhere in here, which is that the futures are derivative of the spot market after all.

So it feels very unlikely at this point that the SEC is going to appeal.

I guess that would go to the Supreme Court, but that seems unlikely.

There are still avenues open for the SEC to deny a spot ETF.

Spot Bitcoin ETF is coming at some point.

They just, This is breaking news that will be old by the time this is listened to but they just delayed on Wisdom tree and galaxy so like they're not just coming out and approving these And I think the timelines that like James Seifert and Eric Belch in us from Bloomberg say or Jan

So it's gonna be a minute but it's positive and it was 3-0 and it was I think it was a Trump judge and Obama judge and a Biden judge, and he lost

And What's interesting, kind of outside of that, is just if you look at the recent dissents into SEC settlements, especially the NFT 1 that was, I think, this week, you have, there's 5 commissioners on the SEC.

It used to only just be Hester Pierce kind of issuing a letter of dissent Against the the different kind of judgments that the SEC is putting on these these people that are going after And so it's it's like the courts It's also like the Commission and you only need 3 out of 5 for something to kind of for something to get approved by the SEC.

So you already have 2, and I think this case is just kind of like another, it may be the straw that broke the camel's back in terms of, okay, now you probably have 3 SEC commissioners that are saying, this just isn't reasonable anymore, which it isn't.

Only thing I'd add, James Seifert and Eric Bokranis from Bloomberg, They up their odds, I believe, to 75% chance that a spot Bitcoin ETF gets approved in 2023 and a 95% chance that it gets approved in 2024.

So I think, you know, it's really financial gravity at this point as to like what direction we're going.

What does that do actually to Bitcoin markets?

It's probably positive, to say the least, in terms of where capital will ultimately be flying.

What the courts hammered on was the difference and the manufactured difference between Spot and Futures.

And really what this ruling says, as we've been talking about, is you have to go back and tell us another reason, or you have to go back and give us a different reason as to why you're denying the spot Bitcoin ETFs.

The other way that James Seifert was talking about it is, he said, well, you know, they can also just go back and rescind the Bitcoin futures ETF approval.

I don't think that's gonna happen, frankly.

But there is still a lot of stuff that's gonna have to go through for us to be able to get to that spot Bitcoin ETF.

The other thing, which I think is also, you know, starting to pile up is what's going to happen with Ethereum.

And I think a week ago or maybe 10 days ago, there was a Bloomberg article that talked about the fact that the SEC is apparently open to approving a ETH futures ETF, which I think would be massively bullish for a number of reasons.

Number 1, obviously, the capital formation that happens when you have an ETF like that, no matter whether or not it's futures or spot.

But what it also implies is that it would be the first time that you have the blessing of the SEC around Ethereum, because it would effectively mean that it's not a security.

So I think that if that goes through, and that would happen sometime in mid-October, That is also 1 of the most bullish things for the entire industry.

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notes So the 3 paths forward right now is so we don't have a Bitcoin ETF right now The 3 paths forward are 1 it kind of depends on how hard Gary Gensler wants to fight, right?

So 1 is he really wants to fight, he wants to go to the mat.

And so they have 45 days to figure out whether or not they want to appeal or not.

Second option is They don't appeal this, but they come at them from a different angle.

They can't use the argument of, hey, this is not a market of sufficient size to prevent manipulation, but there's a different reason we want to say no.

Or the third is that they were seen in the futures.

It does feel like the difference between now...

So the first Bitcoin ETF got introduced, what, 10 years ago with the Winklevoss twins?

No, not that long, but I think it was March 20th, 27 or

However long it was ago, like several years ago, the biggest difference is that BlackRock's now in the game, I think.

And now there's like, there is a real player from Wall Street, I think, who's not Wisdom Tree and something like that.

I think the appetite is there, but also the political influence is there now.

So I don't see them rescinding this futures ETP.

I don't know what you guys think about that.

No, that's more of like a straw man example of like that is possible, but it's like 0% chance of actually that's gonna happen.

Yeah, I mean, the other part on that second point, about going back and kind of figuring out a different angle to come at it.

You know, the SEC has also been really, really difficult when it comes to custodians, and they have this new custodian role that they're working through the system for registered investment advisors.

So it is possible that that could be the new angle of attack.

And if they were to come at it from a different angle, I think that would be the most likely 1.

I think there's, I mean, 1 of the other differences, though, Jason, even in between 2017 or whenever the Winkle virus applied to that Bitcoin ETF is the market is definitely much larger right now.

And there's a lot of the original argument that the SEC focused on and why I think there was a futures ETF allowed before it was bought is market surveillance.

And it's much easier for them to conduct their definition of market surveillance if there's a futures trading on the CME as opposed to Bitcoin that trades on all these different offshores exchanges.

And that part, partially some of those challenges have been solved because there are better surveillance technologies now.

And you do have this sort of US infrastructure in the form of what Coinbase has built out since 2017.

So you have this kind of Nasdaq Coinbase partnership, which allows that to be possible.

The other thing is the political will thing I wouldn't underestimate as well either.

And I think 1 of the, we can get into the Uniswap ruling as well, but it does feel like there's a tide that's turned.

Jim Chanos talks about this as well within the context of fraud.

And I think the analogy applies here, which is when everything is ripping up, there is 0 demand out there to get to the bottom of frauds, right?

Because everyone's making money and it's like, don't fuck up the money.

But as soon as everything turns around, everyone wants to know why.

So the demand for people to get to the bottom of fraud and bad activities is just much higher.

And it feels like a couple of months ago, the demand for people to find accountability for why they were losing money was at its highest.

So I think that was the point of the SEC's highest demand political will, and that's moving back in the opposite direction now.

And there was actually an article from the Wall Street Journal.

There were a couple articles that came out this week, but this 1 comes from the editorial board of the Wall Street Journal, which is significant in my opinion.

The title of this article is the SEC strikes out again on crypto with grayscale.

And there is some choice, you know, there's some choice language here from this is coming directly again from the from the editorial board of the Wall Street Journal.

And it just feels it feels like the it feels like the tide is turning to me.

But I think in the court of public opinion, the SEC is finally looking to start like it's losing.

And a lot of the rationale that they use to target crypto firms wasn't actually as solid as they originally thought.

I think what we're going to hear next, not necessarily next, But what I think we're going to start to hear at some point soon here is effectively mission accomplished.

And the SEC is going to say, we did it, we regulated it, it's now safe, we're fine with it.

They're not going to let Grayscale get converted before BlackRock gets approved.

But we've got, you know, traditional guys, Wall Street involved.

And I think they're going to memory hole the losses and basically turn it around and turn it into a positive.

Gensler is holding Bitcoin spot ETPs hostage in his crypto market power grab.

Until crypto exchanges register with the SEC, he won't authorize spot Bitcoin ETFs.

Arbitrary regulation and regulatory overreaches are recurring themes of the Gensler SEC and Biden administration.

Is he trying to match Lena Khan's losing record at the Federal Trade Commission.

I mean, you can kind of see this with Lena Kahn too, and this probably doesn't mean much to people who watch this podcast, but she's been very aggressive in losing, and now she's been more favorable, waving things through, waving like kind of big, you know, competitive acquisitions through.

I think at a certain point you just need to stop losing.

You know, stop, you know, What do you do when you find yourself in a hole?

And then just kind of like try to like crawl your way out and maintain dignity.

But I think the dates to look out for are September 12th is when Gary Gensler testifies before the Senate Banking and house financial services committees.

Then you have October 10th, which I don't know why is the day that people put out there for E-futures.

I think that's like the next approval potential date.

So it's all happening in Q4 for the most part, which is exciting.

Yeah, and then the end of the 240 days, the other big 1 is Q1, right?

So I think it's March, mid-March basically, all of the final.

So you have 240 days to review an ETF if you're the SEC.

And a lot of the end of the 240 days comes due in March for I think 7 out of the 8 open Bitcoin ETFs.

BlackRock, Fidelity, Wisdom Tree, Valkyrie, Bitwise, a whole bunch of those are in March.

What if we get the spot Bitcoin ETF approval on the same day of the halvening?

Right into the halvening, right into presidential year, right into the Fed turning the interest rates around.

So the other angle, which I think is interesting just because we were talking about it, is, you know, they touched on the sort of the administrative state perspective that this has been pervasive across the Biden administration.

You also had 1 of the leading candidates for the Republican nomination quote tweet Katie Han about the SEC losing

I think you're going to start to see the candidacy, all the candidates start to build a perspective.

You got RFK announcing his presidency at Bitcoin Miami, you've got Vivek Ramaswamy talking about and quote tweeting Katie Hahn.

I think this is going to become a new, you know, rallying cry.

Especially, you know, if you want to reach the younger demographics, this is gonna be a good way to do that

Vivek What a guy He's got some pretty out there ideas, I don't know if we have enough time to get it all of them

We're doing a political app 1 of these days.

Yeah, people are going to be, yeah, fired up.

But it's good to see getting the press, and it's good to see Bitcoin standing for kind of like the, it's gone through a lot of narratives, but now I think Bitcoin and crypto are kind of like push back against the regulatory apparatus nanny state.

And I don't think there's many other assets that fulfill that role.

Like you could say oil is that in some ways.

But like I like I personally don't like oil.

Like I hope we can save the planet at some point.

I think most people agree with us on that.

Like Bitcoin is kind of more neutral in many senses and it's gotten sort of beat up the past couple of years.

But it's a good narrative backdrop to have for it.

I think Bitcoin becomes, I think it's part of an overall backlash to, yeah, the political movements of the last couple of years.

And it's become sort of, It's not an accident that across both sides of the aisle, the fringe candidate, they all support Bitcoin.

You know, and I talked about this example a little while ago.

Remember when Spotify was faced with deplatforming Rogan or facing all that backlash for having Joe Rogan on the platform.

So all of this eventually boils down to a business decision for a company like Spotify.

So imagine if they make the decision, which they did to side with Joe Rogan, maybe they lose a little bit of business.

So now that you have that audience of Rogan, what impact, if any, do you think supporting Bitcoin would have on Spotify as a business?

That probably moves into the, yeah, this is probably a plus EV thing for me to do.

And I don't think that's the core driving force for crypto or Bitcoin, but marginally, I think it actually ends up mattering.

It becomes a part of these political movements and things like that going into the future, if I had to guess.

And it's not just domestic, it's international.

The narrative is starting to form and it's starting to form right before the halvening, right before interest rate cuts.

Like if you, In January of this year, if you could draw out a plausible, how do we recover the industry from a macro perspective, it would be somehow some banks blow up.

There's an ETF that somehow gets approved and we get back in the narrative from a political standpoint.

Those would be the narrative things that I would care about, other than use cases and things in Dodgers to the industry.

What do you make, if anything, of the price action post the GBTC news?

So originally, there's a big move up from, I don't know, like 25 to 28 or something like that.

Looking today, it's basically given everything back.

Also, the discount on GBTC, it jumped like 12% in 1 day, something like that.

But it's basically given up most of its gains.

Do you think there's anything, is it just a little bit of a knee-jerk reaction or what do you think about the price action?

Broadly speaking, it's just so slow right now.

Nobody wants to be buying or selling right now.

I think people are just looking at their wounds waiting for some of these things to happen.

This fall will be a lot of positive new catalysts, but people are waiting for that right now, is my opinion.

It's also the slowest day, or the slowest week of the year, 2 weeks for TradFi.

There's no liquidity in TradFi, everyone's out.

It's like the skeleton crews are manning the desk.

I think people are preparing to come back from vacation and settle into whatever narrative they're kind of force fed when they sit down at their Bloomberg terminal.

Yeah, I think the first 2 weeks of September will dictate what the market, like the macro market trajectory is for the rest of the year.

guys think Bitcoin ends over or under 40?

Yeah, it sounds like this might become a financial advice podcast, which we can't participate

it's an interesting philosophical question that we can't answer.

But I think the price action, on 1 hand, like people were trying to price it in.

And on the other hand, it's like not possible to price it in because it's like, the variables are accessibility, interest, macro, but also I think I heard on Eric Balchunas podcast that registered financial advisors control somewhere between 10 and 15 trillion of wealth.

And he was basically saying if they even get a percent or a tenth of a percent, that's 10 to 25 billion of flows.

And if you get those amount of flows, it's probably good for, you know, the best opening year other than like QQQ.

But it'll be a substantial part of the market cap of Bitcoin and Ethereum and everything else.

So like, I don't think it's really possible to price it in.

But if there's any, even a sliver of truth to that data, I don't know.

This this could be far larger than people anticipate.

Tom Tom Lee from Fundstrat says that if a spot Bitcoin ETF gets approved, Bitcoin is going to, based on the data and analysis that they've performed, 180000.

I mean, they do actually have rigorous analysis.

The Yano knows I've been banging the drum of RIAs for like 5 years in BlockWorks because these guys control an enormous amount of money.

In the US, I think that's a global stat, 15 trillion.

I think in the US, it's like 3 or something like that, but trillion with a T.

And from my understanding, there's a basic incentive problem with RIAs that you guys probably know, which is that RIAs get comped on the amount of assets that they're managing on your behalf.

And the way that they track those assets is partnerships with brokerage, right?

The backend infrastructure is like, hey, you have your assets on TD Ameritrade or Fidelity or whatever, and I can track the amount that I have control over.

If an RAA today would recommend you put some of your assets in Bitcoin, it would take them off of the brokerage, move them onto something like Coinbase, then they're not getting paid on that.

It's like the silliest incentive misalignment, but it's so real.

Not only that, so there's a disincentive issue or an incentive issue.

It's also, I don't know if anybody has tried to do this, but has anyone tried to actually put Bitcoin into an IRA?

It is like, there are now a couple of products, but you have to seek them out.

You have to fund it by transferring money in from your existing IRA.

And then you have to start effectively a prime account with like a Coinbase or any of these other platforms that, you know, like, it is so hard to do.

And, you know, I, we should be the poster child's children for, you know, being able to do this.

But yeah, my I was talking to my uncle recently.

And, you know, a number of funny things always happen whenever I talk with him.

But, you know, he was he was telling me the process of what it was like, he was like, yeah, I was thinking of buying some Bitcoin and some Ethereum and putting it in my IRA.

And he just walked me through the process.

He's like, I don't even know how to start, you know, not like actually how to do it, but how to even start.

I also think broadly, like, there's not going to be a silver bullet, it's going to be a bunch of lead bullets.

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Grayscale Victory: Another Spot of Bother for the SEC? | Round Up