BTC Sessions - NEWS ROUNDUP: Grayscale To Sue SEC Regarding Bitcoin ETF Rejection ep220

Episode Date: December 3, 2021

Grayscale is looking to sue the SEC on its perceived unfair treament of spot vs futures Bitcoin ETFs. This and more in today's news roundup! 💪 SUPPORT THE SHOW: Shakepay is the easiest way to buy Bitcoin in Canada Sign up now and get $30 free after your first $100 purchase! https://shakepay.me/r/BTCSESSIONS ALSO search/subscribe to Shakepay on YouTube! LEDN Bitcoin backed loans –  get $10 free with a savings balance of $75 or more for 15 consecutive days! https://start.ledn.io/btcsessions Get Wasabi wallet for Bitcoin privacy https://wasabiwallet.io/ Keystone Wallet: secure your Bitcoin! http://bit.ly/KeyStoneSessions BillFodl: get your wallet backups in solid steel. https://privacypros.io/btcsessions Bitrefill: use Bitcoin to purchase gift cards https://www.bitrefill.com/buy/?code=O04UMic9 Like what you see? BITCOIN TIPS: https://strike.me/btcsessions

Wasabi wallet and fairly private. Welcome, everybody. What's going on? We got some news to chat about this week. I hope you're doing well. Looks like Grayscale is gearing up to potentially sue the SEC for not letting spot ETFs through. So that's an interesting little development. We're going to talk, of course, about inflation because who isn't talking about inflation these days? It seems like the past few weeks It's been one of the top things to chat about plenty there. Transitory is out.

Transitory was transitory. So we'll chat about that. We've got a whole bunch of stuff going on. Some developments with Jack Dorsey and Twitter and Square and other new names in the mix. So a little bit of everything. As always, this is live. Anything can happen.

So I defer to my good friend Bill here. We'll do it live. Okay. We'll do it live. Do it live. I can write it and we'll do it live. The fucking thing sucks. Of course, if you haven't already, please do hit like, subscribe, share, all those things really help get this content out to more people.

And I am Ben with the BTC sessions. This is your daily session. So before we dive into the news, let's take a look at where we are in the market right now. Pulling up the bitbow.com. dashboard. We're sitting at $56,734 per coin. A single U.S. dollar will pick you up 1,763 sats. If this isn't the most sideways crab walking chart I've seen, I don't know what is.

We zoom out to the seven day. It's like a sideways grab walk of death. There's just not really much going on. Even the monthly, it's just kind of like, you know, obviously we had that spike in kind of all time high in November 10th, but most of November was just pretty much sideways. So we've just kind of been sitting at this price point. Even when we zoom out year to date, you know, we obviously were up a lot this year. You know, we're still up just about 100% on the year. But, you know, we hit some of these

price points very early in the year. You know, like we peaked out in April, around April 12. and we're in kind of that same range here at the end of the year, which some people look at as a negative thing. Bitcoiners get bored, easy. You know, it's easy to get complacent and then get frustrated when it's not just up always. But sometimes a little sideways is good too, because when you get sideways,

it kind of coils up and gets ready to spring. So hopefully we'll see some excitement through, December, maybe early next year. I get the feeling that this this is kind of a little unprecedented in a bull market in a couple of different ways.

Number one, you know, the dip that we saw halfway through the year where we actually saw 50% retrace from the highs. But also just kind of, you know, us coming up and tapping a new all-time high and then just kind of this sideways action for a while.

Not typical. of bull runs, which could be a sign of a, you know, a little bit healthier market. It could also be just that we're getting extended cycles now and which a lot of people were assuming that everything from this bull run would be contained within 2021, which was kind of my perspective too. I think that's shifting. And if we were to continue on this trajectory and see new highs into the new year, that gives credence to one of two things.

One, lengthening bull runs and potentially shortening bear markets or two, and this is a bit more of a stretch, but to the super cycle theory, which is just, hey, hyper-bitconization is on its way. I don't know, but I tend to be looking at the idea of lengthening bulls and shortening bears, where basically the peak is taking longer and longer to hit within that kind of four-year-having cycle. And then the bear markets are short but violent. So I guess we'll see. We've got nothing but time to hang around and wait.

I'm not mift either way because I'm just stacking stats and kind of hanging tight. So, hey, before we get into the news, of course, shout out to sponsors to the show, shakepay.com. Honestly, easiest way in Canada to buy Bitcoin to stack stats. Their referrals are up now to 30 bucks a pop. So if you're already not on Shake Pay, there's a link down below. You can click it. And when you buy your first 100 bucks, you'll get 30 bucks for free to stack some extra stats. Also, once you refer a friend, you both get the same deal, and you can now shake your phone every day for free sats.

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Plus, again, they do have referrals that you can get to get even more sats back. So check them out. Links are in the show notes. Keystone, you know, these guys, one of my most loved and most often used hardware wallets, air-gapped, meaning you never plug it into anything internet connected. Keys are kept safe and offline. Works with a ton of different options. Blue wallet, Spector, Sparrow, Wasabi.

of them, check them out. Super awesome. Also, I highly recommend you check out their Bitcoin-only firmware. And finally, if you're backing up any important Bitcoin wallet, be sure to get it in solid steel. I always use my bill fottles over at privacyprose.io, and it's just, you know, water damage, fire damage, stuff like that helps me give some peace of mind to myself. So check them out. And with that, let's dive into this news. Yeah, so the SEC, they have passed or approved a Bitcoin's futures product, but they keep on rejecting the spot product. The spot product, meaning it's actually backed by Bitcoin. So when you purchase an ETF, you would actually, whoever you purchase the ETF from,

they would need to have the Bitcoin, the underlying Bitcoin backing it in custody, not so with futures products where you're just speculating on the future price. of Bitcoin. So this article here kind of outlines why Grayscale thinks this is kind of a BS method of approaching it. So I'm going to read through some of this because there's some good points here. So in a letter dated on November 29th, Grayscale Investments has questioned the securities and exchange commissions or the SEC's decision to block Bitcoin spot ETFs. The asset manager argued that the commission has no basis to allow investing in derivatives markets and not in the asset itself.

The SEC has made a series of rejections lately that included an offering by Vanek. While Grayscale considers it discriminately, it is also awaiting approval on his filing to convert the Grayscale Bitcoin Fund or GBTC into a spot offering. Citing reasons such as a strong demand for physically backed products. The global head of ETS at Grayscale has previously argued at Grayscale, we believe that if regulators are comfortable with ETFs that hold futures, of given assets, they should also be comfortable with ETFs that offer exposure to the spot price

of the same asset. In the affirmation letter, Grayscale also reiterated that because Bitcoin is not a security, there are no registration prerequisites under the Investment Company Act of 1940. Additionally, it questioned the regulator's prior disapprovals premised on the risks of fraud and market manipulation. And according to the firm,

the disapproval over unfair order unfairly discriminates against BTC and its holders, and it violates the Administrative Procedure Act or the APA. So they say that the CIOs at Bitwise says, ultimately, what many investors want is a spot Bitcoin ETF. We think that's possible. So Bitwise will continue to pursue that goal, and we will look for other ways to help investors get access to incredible opportunities here. Now again, Gary Gensler, head of the SEC, the chair there, he's more comfortable with futures over spot offerings.

This letter also touched upon the fact that while currently trading Bitcoin futures products has been welcome to the market, commissions has continued to apply its vague and discretionary section between the two products. Under the APA, the commission must treat similarly situated products, similarly unless it is. has a reasonable basis for disparate treatment. Grayscale claimed the investor risks of Bitcoin back spot and futures exchange products are indistinguishable. It went on to add that unfair treatment is more likely to harm rather than protect U.S. investors. I'd echo a lot of this.

I think it's insane that they're letting futures trade, but they're not touching spot. And because of this, Grayscale looks to be preparing to sue the SEC over the spot Bitcoin ETF. So they held $38 billion worth of Bitcoin as shown above and has sent a pre-action letter to the SEC arguing their decision to allow futures ETFs but not spot is arbitrary and capricious. Their vice president in the legal department said last night our attorneys at Davis Polk sent a letter to the SEC arguing that the approval of the futures ETF but not the spot-based ETFs, like GBT is arbitrary and capricious,

and therefore in violation of the Administrative Procedure Act, or again, the APA. So we'll see how this plays out. I'm not really sure if there's much of a precedent set for this previously, but, I mean, they must think they have a shot if they're going to go ahead with legal action here, and they're sending these letters to the SEC. Again, I think it's kind of insane.

And like it just speaks to that, given that there's so many different products out there in other markets, right? Like further down the article here, in Europe, four spot crypto ETPs launched just this week. An ETP is basically the European

equivalent of an exchange-traded fund or an ETF. These are called exchange-traded products. And in Canada here, again, first Bitcoin ETF to pay monthly yield launches in Canada, we've already got a ton of different Bitcoin ETFs

with assets. actual allocation to spot available in the market. They got approved earlier this year and they keep on coming. There's just a ton. And so you see in the market in the U.S., people are trying to get exposure to different things when really they just want exposure to the underlying asset in an approved vehicle. It's insane to me that this is not yet approved.

Anyways, this Bitcoin ETF to pay monthly yield launched in Canada just recently. When was this? This was yes. yesterday, no, two days ago, sorry. And so it's offering monthly yields, and it's being listed on the Toronto Stock Exchange under ticker symbol BTCYB. And so, yeah, this is effectively giving,

it's employing derivatives-based covered call strategies to pay investors monthly yield. That's basically when you own the underlying asset, And you don't think it's going to appreciate beyond a certain point in the next little bit. And so effectively, you offer to sell that asset at a point in the future, at a certain point that is typically above the amount that you think it won't hit. So there's like a strike price that you set where it's like if it goes beyond that, then you're willing to sell it at that specific price. So let's say Bitcoin was at, you know, 60K and you don't think it's going to go above 80 in the next little bit. And so you would basically offer, you would offer this and you would say the strike price is 80.

And if it goes above that, you will sell it at 80 by a certain date. And so that would be basically you're giving a contract. Somebody's going to pay you for that contract. So you'll get a kickback for that. If it expires and it hasn't gone beyond the 80K, well, then you get what you were paid for the contract. And it basically expires without the contract being exercised. If it goes above, you still get paid what you got paid for the contract, but you will have to sell the Bitcoin. It's still going to be at a profit from what you originally bought it at, but you won't experience the additional gains on top of it.

So basically, it's just a way of people that think Bitcoin is going to go up, but not a ton. selling a contract to somebody that's more bullish than them, and then basically able to kind of pocket that extra money. And the only real risk in the downside is if the value of Bitcoin depreciates below where you bought it and below if you include in the extra fee that you had on top of that for the contract that you set up. So there's a lot of moving parts there, but basically they're using this to generate a,

yield for the people that want to buy those contracts. So interesting, still, I'd rather just stack some stats myself. Um, Goldman is diving in. It's funny. These, these fucking guys, they keep on going hot and cold on all of this. When in the background, they're really hot the whole time and they're planning their next move. Obviously, they needed some, some, uh, runway to announce anything like this. But basically, Goldman is looking at options markets for the next big step for institutional adoption and when it comes to things like Bitcoin. So they say here, Goldman Sachs, the Wall Street heavyweight says the next major development for cryptocurrencies will be more liquid options markets as traditional

financial firms pile into the rapidly growing asset class. Quote, we see a lot of demand for more derivative type hedging. This is Goldman's global head of crypto trading. And they said this in a coin desk hosted panel discussion. The next big step that we are envisioning is the development of options markets. He described cryptocurrency derivatives as being in the infancy of product scope when compared with more traditional markets such as equities or foreign exchange. The Bitcoin options market has already been seeing fast growth over the past couple of years.

Open interest in Bitcoin options on the total value of outstanding contracts stood at about $12 billion as of the latest data from SCUE, a subsidiary of Coinbase that tracks data on cryptocurrencies derivatives markets. As recently as the first half of 2020, the market rarely exceeded $12 billion. So that's basically a 6x interest in these types of products. Goldman wants to dive in. So interesting. Let's keep going.

Let's chat some more inflation, guys. I know we're chatting a lot about it lately. I'm sure you're chatting about it with your normie friends more often nowadays. Head of the Federal Reserve. Jay Powell, he had something to say. He said it's time to retire transitory. So Federal Reserve Chair Jerome Powell on Tuesday said the word transitory is no longer the most accurate term for describing the nature of the current high inflation rate. Quote, it's probably a good time to retire that word.

He said in response to a question about his persistent use of the word to describe how long high inflation is expected to last during testimony to the Senate Banking. committee. So they were used in the word transitory and a lot of people didn't even understand what they meant by that. So when they say transitory, what they were saying is that inflation is high right now and that rate of inflation, which in the in the U.S., they just clocked at 6.6.2% last month, which even those numbers are fudged and we've discussed that on the show previously. but 6.2% is what it's at right now, which is high given the indexes that they're using. And when they say transitory, they mean that that rate of higher than normal inflation would last for a short period of time.

And then it would drop back down to quote unquote normal levels, which is targeting in and around 2%. So it's not that prices would drop again. it's whatever that inflation is at, the prices go up, that amount on a yearly basis. It's just that they're saying that that rate of increase in price would be transitory, a.k.a. it goes up quicker for a short period of time, and then it goes back to still going up, but not as quick. Well, now they're just getting rid of that term, and they're saying, well, now it's going to go up quicker for longer, which.

So we've gone through a whole bunch of different chatter in and around inflation. One, there is no inflation. Two, well, there's a little bit of inflation. Three, there's inflation, but it's transitory. Four, well, it's probably not transitory. And then also simultaneously we're getting, but it's good. Inflation's good for you. Which nobody's buying the inflation.

Nobody's excited and happy about going and picking up their groceries for way more. or that homes are way more expensive. Yeah. So that's that. Yeah. So, and then he goes on to say that the new variant poses a downside risk to the economy and complicates the inflation picture. So he said that it reduces people's willingness to work in person,

which would slow progress in the labor market and intensify supply chain disruptions. Maybe it reduces some people's willingness to work in person. but also a lot of that is mandated. So we don't really know if it's, if it's individual decisions or if it's mandates. So yeah, you know, this is being echoed in other places. Inflation, the Eurozone hits a record high of 4.9%. That is up from 4.1% just last month in October.

So almost, you know, that's 0.8, well, up another percentage point, basically, over the last month. And then we have same thing. variants could keep inflation higher for longer. This is from the Bank of England Policymaker. So they say the emergence of the newest variant could mean inflation remains high for longer than expected if it prevents consumers switching their spending from goods to services and prolongs disruption to global supply chains.

That's according to the Bank of England Policymaker. Catherine Mann, who joined the BOE Monetary Policy Committee in September, has so far been one of the more dovish voices and voted with the majority to leave interest rates on hold at 0.1% in November despite surging inflation. Guys, they can't raise rates.

If they raise rates, the whole bond market is going to dump. It's going to, like, they're kind of between a rock and a hard place because inflation sucks and they've been propping up the bond market and propping on, like, they've basically been skewing

the interest rates by buying up all of these bonds. The thing is, again, they're funneling more and more money into the system by doing so, creating more inflation. What do you do? My guess is they, as we're kind of seeing, they just keep printing.

They'd rather debase the currency and try and explain it away with other reasons than admit that no matter what they do, they're going to screw everything. And stopping the money printer and stopping buying things is probably going to be a quicker employer. than just printing and printing and hoping that they can kick the can down of the road to the next person in line.

So yeah. Let's jump on to Jack Dorsey. He quit. He's no longer the CEO of Twitter. He's passed the torch to somebody else. He's gone to focus on other things. He did post his letter kind of explaining what's going on. Now, he's instated, he previously spoke at Bitcoin 2021.

He said, if I was not at Square or Twitter, I'd be working on Bitcoin. Well, I think he's leaning towards that right now. Now, first, let's talk about who's in his place. Parag Agrawal. I'm not sure how to say his last name. Anyways, not super keen on that. Hopefully Twitter doesn't get too much worse, but you're not wasting any more time. So the new CEO, this is from a November, so like literally a year ago, he said,

our role is not to be bound by the First Amendment, freedom of speech, focusing less on thinking about free speech, but thinking about how the times have changed. I don't know if that's a great first thing to be hearing from a new CEO of a social media platform, but I digress. Also, like almost immediately after Jack left, they added, uh, uh, uh, Ethereum receiving addresses to profiles. And then we have a .eith that is joining the team this past month. Good morning.

Excited to have tests on the team. There are so many opportunities for Twitter to leverage an ad on Web3, especially in the creator space around monetization, ownership, identity, community, and more. Twitter building out a crypto team. And then this is Tess, the person that just got hired saying, I'm thrilled to share that I've joined Twitter to lead a new team focused on crypto, blockchains, and other decentralized technologies, including and going beyond cryptocurrencies. So I don't know, guys, brace yourself for a lot more shit-coining on Twitter.

Now, on the positive note, look at some of the changes that are taking place where Jack has led to. So if anything, this is kind of cementing in my head that Jack was the thing, between Twitter and Twitter just going full shitcoin. Because what used to be known as Square Crypto has now pivoted and changed its name to Spiral. And its Twitter handle is now Spiral BTC. So they dropped the crypto there. They also, Square Inc has changed its name to block. And so this will encapsulate and represent a number of entities.

this is Square, Cash app, Title, TBD, and formerly Square Crypto, now Spiral. Okay, so that's all going to be underneath it. No major changes in what those teams are doing. Spiral slash Square Crypto is still focusing on kind of furthering Bitcoin development and everything there. And, you know, Square is still doing everything that it's set out to do, financial inclusion, all of that good stuff. So yeah, hopefully this means that Jack will just kind of laser focus in on Bitcoin and furthering that. And further to that, Square self-custody, they've been tasked with they're working on hardware, easy to use hardware. And they dropped a blog a couple days ago and they said that, hey, we're focusing on hardware here.

And one of the things that we've decided is we've chosen to rely on nearfield community. or NFC for the link between hardware and software components of this product. NFC is wireless technology that allows two devices to communicate each other at close range and powers many payment identification and access cards as well as smartphone-based technologies like Apple Pay. They said that obviously there's a lot of tradeoffs to consider here, but they said that compared to alternative mobile communications methods like Bluetooth, NFC will help us keep interaction with the device simple and the hardware is streamlined and low power as possible,

enabling us to provide a low-cost, seamless experience. So I'm interested to see what they do with this here. I know that having the ability to transmit just via tap can probably be scary for some, but we'll see how it plays out. like even Rodolfo over at Coin Kite with the Cold Card is experimenting with NFC right now. So hopefully done right, this can be done securely as well. But either way, I'll be looking with interested eyes to see what happens.

Just a couple last things I wanted to touch on here. So David Marcus, he was the head of Novi or Facebook Financial, now known as Meta. Interesting to see his kind of recent pivot. So this was a tweet from him earlier in November. He said inflation at 6.2% means that if we keep it steady for 10 years, your $100,000 will become $54,800 by then. Compounding is a powerful source. Satoshi is having popcorn somewhere right now, hashtag Bitcoin.

This is the head of financial services at Facebook. And given that Facebook was focused on creating a stable coin of sorts and creating their own currency, It's interesting that he was tweeting about Bitcoin here. Well, fast forward to the end of the month. And here we go. Personal news after fulfilling seven years at Meta, aka Facebook with the rebrand, I've made the difficult decision to step down and leave the company at the end of the year. Yeah, so he's out with Facebook, which given the pivot and given what's going on,

I don't want to speculate too much, but, I mean, Jack leaving and now David Marcus leaving. I'm wondering if maybe the two will cross paths on projects. That could be interesting given that the head of financial services at Facebook is tweeting out about Bitcoin in response to rampant inflation. I'd be very interested to see that happen. So I don't know. Here's hoping.

Last couple of things. Noddle. They're making a lightning-only product. So hardware node provider Nodal has introduced Nodal Light, a lightning network node offering geared towards merchants in developing countries, according to a statement sent to Bitcoin magazine. The lightweight device enables merchants to accept Bitcoin payments through lightning while retaining complete control of wallets and keys. Quote, merchants using Nodal Light will have full control over a dedicated lightning node,

while benefiting from shared Bitcoin core and payment processing resources hosted by the Nautil in their cloud infrastructure. The hybrid setup is a novel modular approach that highlights efforts made to bring Bitcoin to a wider public while maintaining a strong focus on security. So Nautil Light will be available in early 2022 with a price point of around 200 bucks. So again, given that you have You have El Salvador basically onboarding a country to Bitcoin, and a lot of that is focused on lightning. I mean, the big hurdle here is to utilize lightning in a certain way, especially as a merchant and payment processors and stuff like that.

It can be a bit of a hurdle and a little bit more of a pain point in terms of infrastructure to be able to host the entire Bitcoin blockchain on top of a lightning node. And so I guess they're kind of cutting it down to make it so that. it's less expensive to host that and it's more streamlined and the price point is just on point. So here you can see if you're watching on the show, you can see the box much smaller than before, just a little antenna on it, plugs into euthernet. So yeah, just tiny little thing. So yeah, I mean, that's awesome. I'll have to try one out when they drop.

Kudos to Nautil to try and make Bitcoin infrastructure more accessible to everybody. And last thing, of course, Michael Saylor announcing Micro Strategies bought a shitload more Bitcoin. Micro Strategy has purchased an additional 7,002 bitcoins. God damn. $414 million in cash at an average price of 59,187 per coin. This was as of November 29th. They now have 121,04 bitcoins acquired for $3.57 billion at an average price of $29,534 per coin. So basically, well, somewhere around double, double is money so far. Doing pretty well.

I wouldn't complain. Yeah, guys, that's about it. What else do I have to tell you? Oh, I'm going to have a fun. Why are we bullish tomorrow? Some good guess. Mr. Max Kaiser is coming on. Miss Stacy Herbert will be joining us.

Stefan Lavera. And Meditation Man, aka T.C. on Twitter, Corey Clipson was going to make it, but he had a wrench thrown in his plan. So unfortunately, he can't be there. So I put the call out to Twitter. I said, PLEBS, drop me your best reason. for being bullish. This guy had a pretty damn good reason.

I really liked the way he put it. So excited to throw another pleb into the mix. I think this should be a regular thing. Adding a pleb, have a few recognizable names that people want to hear from, and then some new people into the mix. I think that's a positive thing to do. So I think moving forward, I'll probably try and have at least one or two not recognizable names that have some cool things to say on the show.

And I think that that'll mix it up a little bit. But anyways, very excited for that. So be sure. Don't miss it tomorrow. 6 p.m. Eastern Time. Max Kaiser, Stacey Herbert, Stefan Lavera, and meditation man on the show. Very excited about that. With that, I'm out.

Have yourselves a wonderful evening. Of course, you guys can like, subscribe, share. All those things really do help. Hit up the sponsors, Shake Pay, Lead, and Bit Refell, Keystone, and Bill Fottle. All of them link below. really liked what you saw. You can drop me a Bitcoin tip at my strike.m.me page. That is strike. dot me slash BTC sessions. Head there, type in any amount you want. Hit the tip button. You'll be greeted with a lightning invoice or if you tap to the right in a regular Bitcoin

QR code. Uh, anyways, guys, have a great night. I will see you guys next time. I am Ben. And this was your daily session. See you guys.