The Breakdown - ETH's Successful First Day ETF Launch

Episode Date: July 25, 2024

NLW covers day one of trading of the Ethereum Spot ETFs. Plus, no Kamala for The Bitcoin Conference. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribe to the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the Big Picture Power Shifts remaking our world. What's going on, guys? It is Wednesday, July 24th, and today we are catching up on the first day of EFETs, some more on Mount Gox distribution, and the latest scuttlebutt around Kamala Harris, the Bitcoin Conference, and whether we're going to see a changing of the guard when it comes to Democrats and crypto. Before we get into that, however, if you are enjoying The Breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash

breakdown pod. Hello, friends, a bunch of catch-up stories today, the first of which is that the first day of trading for the Ethereum ETFs is in the books, and results look fairly strong. The products saw a significant amount of volume trading more than $1.3 billion dollars worth. By way of comparison, the Bitcoin ETFs traded around $4.5 billion on launch day. Trading was concentrated on the BlackRock and grayscale products, with none of their rivals cracking $100 million in volume. The launch itself was clearly a sell-the-news event, with Ethereum dropping by 1.5% in the opening half hour and finding a bottom down 2.5% by lunchtime. A reasonable recovery in the afternoon made the trading day largely awash.

Van Spencer, a framework ventures, commented on how relatively strong that price action was, tweeting, notable that Bitcoin dumped 10% on day one of the ETF and Eiff is flat. Powerful stuff, in my opinion. As expected, the outflows from Grayscale's Eith E were brutal. The fund lost 484 million after starting the day with a little over $9 billion in assets. Just 15 million of these funds flowed into their low-fee mini-ETF. Day one outflows for Grayscale's Bitcoin product were only $95 million, so it seems that traders were a little more prepared to rush for the exits this time around. The other seven products, however, more than made up for these outflows, leaving the day with a positive 107 million in net flows. BlackRock led the day with 266 million worth of inflows,

while Fidelity recorded 71 million. Bitwise was arguably the most impressive performer punching way above their weight class with 204 million worth of inflows. The ETF professionals were impressed, with ETF store president Nate Garassi tweeting, look at Bitwise putting on yet another masterclass on how to launch an ETF. You love to see it. Heading into the day, Bitwise had polished up their crypto credentials, publishing their Ethereum address complete with ENS, and pledging 10% of profits to ecosystem development. Santiago Santos thinks we are witnessing something of a passing of the torch for crypto-native asset managers, tweeting, stark contrast between ETF providers.

Grayscale charges mercenary freeze. Bitwise donates 10% of profits to support open-source development. Choose wisely. Compared to the Bitcoin ETF launch, Ethereum products managed around 16% as many inflows for day one. Overall, it seems as though the first day played out within expectations. Most analysts were looking at the Ethereum ETFs being somewhere between 10% and 30% as popular as the Bitcoin products. We also might be seeing grayscale outflows frontloaded a little,

but it's too early to tell how this will all play out over the coming months. What does seem clear is that the Ethereum ETFs have a place in the market. To the extent that there were negative takes in the lead-up to the launch, many analysts leaned on the lack of interest in Ethereum futures ETFs. By any metric, demand for spot ETFs was an order of magnitude larger than anything we've seen from the futures products. These products also stand head and shoulders above when compared to the rest of the ETF industry. It's almost certain that this year will have seen the two most successful ETF launches in history, with both being crypto products. Bloomberg's Eric Balcunis did a comparison between this launch and everything else that has come to market over the

past year, excluding the Bitcoin ETFs. He found that BlackRock and Fidelity's Ethereum ETFs were ranked first and second in terms of day one volume. Even the weakest of the bunch, the 21 shares ETF was still in the top 10% of ETF launches this year. On aggregate, the Ethereum ETFs did more than five times as much volume as the next most successful ETF launch over the past 12 months. The Ethereum launch also took the shine off of Bitcoin ETFs yesterday, with those products recording their first net outflow in almost a month. Seventy-eight million was redeemed from the funds in aggregate. It appeared something like a vampire attack for Bitwise, which saw 117 million in Bitcoin outflows this week, paired against their 203 million worth of Ethereum inflows.

Until yesterday, Bitcoin products had been on a hot streak with inflows ramping up for three weeks straight. Monday was the largest day of inflow since early June at 533 million. BlackRock had been running particularly hot, taking in $526 million on Monday, their best single-day performance dating all the way back to early March. In another milestone, Ibit surpassed the Invesco-Nas-Nas-Dac ETF, QQQQQQ, in year-to-date net flows. Ibit is now fourth among all ETFs in terms of net flows for the year. Over in Mount Gawksland, Cracken has distributed the Mount Gawks Bitcoin to individual creditors, marking the first big unlock of Mount Gok's coins after a decade of waiting. Cracken had around 48,600 Bitcoin worth over 3 billion to hand back to creditors. That huge additional supply is now unlocked

and available to be sold. We still haven't had confirmation from BitStamp if they had received their distribution, which is roughly another 3 billion in Bitcoin. So for now, we're just looking at whatever cell pressure is showing up from the creditors assigned to Cracken. Bitcoin fell by around 2% on the news, which filtered out through social media yesterday morning. Trading across the rest of the day was volatile, but price action was muted, stuck in a tight range around 66,000. Crypto-Cuan CEO Ki-Yung-Ju thought the market impact seemed extremely mild so far, tweeting, Mount Cox creditors received Bitcoin four hours ago. There has been no significant spike in hourly spot trading volume dominance or BTC outflows on Cracken since then. We need to wait for

the Asian time zone, but it's a positive sign so far. Traders are now starting to look past the Mount Cox fud towards what comes next. Some think this is a blue skies moment for Bitcoin, with Trader Defi Square tweeting, pretty confident there will be a moment sometime in the next week where one or more large funds decide the BTC supply overhangs are far enough gone and just start aping. Many are benchmark to Bitcoin performance and can't afford to miss the boat once it starts running. Josh Anomics had a simpler take, tweeting, Mount Cox distributed and were not at 18K, bullish. Hello, friends, before we get back to the rest of the show, I want to implore you to join me

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Let's now move over to reports and rumors that Democrat frontrunner Kamala Harris might show up at the Bitcoin Conference. On Tuesday night, Bitcoin magazine's CEO and conference organizer, David Bailey tweeted, We're in talks with Kamala Harris's campaign for her to speak at the conference. It would be very savvy of her to reset the Democrat positioning on the fastest growing voter bloc in the country. They're making up their minds today. This kicked the discussion about Democrats softening on crypto policy into high gear.

It would make very little sense for Harris to show up to the conference empty-handed, so people started compiling their wish lists. Many wanted to see a commitment to getting Gary Gensler and Elizabeth Warren as far away from crypto policy as possible. Gemini co-CEO CEO Tyler Winklevoss commented, Talk is cheap, she would need to start by immediately firing Gary Gensler, withdrawing all SEC enforcement actions against good actors, and ending Operation Chokepoint 2.0. She won't do this so she won't stand a chance in winning back the crypto voting block. Time for change.

Others were more focused on the current criminal prosecutions and the crypto pioneers who are still locked up. Crypto lawyer Gabriel Shapiro wants the industry to push for the tornado cash charges to be dropped. David Bailey tweeted, I gotta be honest, feels like Kamala should commute Ross Ulbrook's sentence before addressing the Bitcoin community. That's the table stakes. Both Trump and RFK have promised to do that day one. Am I wrong? Mostly people had fairly low expectations, with many arguing that basically any change would be good. Justin Slaughter, the policy director at Paradigm

commented, the bar for a reset by VP Harris with several industries is really quite low, even subterranean. Innovation is good. I'll be making staffing changes at many key agencies to bring in new blood, for example, financial regulation. Business has an open door in my administration, as do all stakeholders. Frank Chaparro of the block added, if Kamala Harris goes to Nashville and actually eloquently can explain how crypto and Bitcoin is the future and layout a reasonable policy prescription, she wins the race. He noted that his argument isn't so much that the crypto vote is crucial to a Harris victory, but rather than a pivot here would prove the campaign is willing to do what's needed to win. Of course, the flip side of this argument is that the Bitcoin conference could

easily be the most hostile public appearance Harris would ever have to make. Bitcoiners are not an easy crowd at the best of times, and it takes a particular skill set to win them over. Fox business reporter Eleanor Territ passed on a response she heard from an unnamed crypto executive. Yikes, let's hope she doesn't get boot off the stage. Ultimately, it was all for not, as at 1013 this morning, July 24th, David Bailey once again tweeted, Kamala Harris will not be speaking at the Bitcoin conference. No surprise, what can she say to us when she's actively imprisoning developers, forcing our industry overseas, attacking proof of work, it would have been a disaster for her. All eyes on Trump now. He doubled down about an hour later, tweeting, I'm sorry, but you don't get to just screw our industry over for four years,

push Operation chokepoint and list Gensler and Warren as your champions, and then pretend you're hip with Bitcoin. Major Democrat donor told me Kamala says privately Bitcoin is money for criminals. Nick Carter summed it up, RIP did that 24-hour period when the crypto-lefties really thought they were cooking. To the extent that there is any good news, for those that hope that a potential Harris campaign could act differently from its predecessor, Politico is reporting that Mark Cuban has been in touch with the Harris campaign, saying, I'm getting multiple questions from her camp about crypto, so I take that as a good sign. The feedback I'm getting, but certainly not confirmed by the VP, is that she will be far more

open to business, artificial intelligence, crypto, and government as a service. Changing the policies, changes the message and lets everyone know she is in charge and open, literally, for business. So far, the comments are only coming from tech figures who are already looking for a reason to vote blue. But they seem optimistic that Harris will do enough to secure their support. Aaron Levy, the CEO of Bach said, if by the end of the week she had a tech policy framework out there, a 10-point plan for pro-business, pro-tech, pro-entrepreneurship, and it was credible,

I think she could very quickly rally a significant portion of the ecosystem. Mike Novogratz of Galaxy Digital was also hopeful during an appearance on CNBC, stating, the Gary Gensler-Elizabeth Warren faction, I think, and hope, will have a lot less to say around crypto legislation, and a lot more of the rational Democrats who look at this as a technology that America needs are going to show up. The logic of realigning the party towards tech and business interests is not lost on influential figures on the left. Matt Iglesias has been cheering on this shift, tweeting, I think Harris has a real opportunity to re-engage with anti-Trump business people with a few relatively mild gestures, just speaking positively about innovation and acknowledging that the private

sector is what drives growth could make a big difference. Be the candidate who can mobilize these vibes. Acknowledge that you can't run the country exclusively with professors and non-profit lifers. Also, beyond the opinions of individual tech executives, a more pro-cryptostance could unleash a title wave of campaign funding. According to their June disclosure, Crypto Super PAC Fair Shake is now the largest pack in this election cycle. They have over 200 million in their war chest and have recently demonstrated a willingness to spend in support of pro-crypto-democrats. Ultimately, though, it doesn't seem like we're going to get a lot more answers to this question, at least this week. And so the Trump speech continues to be the big open question when it comes to Bitcoin in politics

this week. One follow-up on that from earlier, last week's speculation was swirling that former President Trump might consider J.P. Morgan's CEO, Jamie Diamond, for the position of Treasury Secretary. A few days later, BlackRock CEO Larry Fink's name was also brought up by the New York Post. The other major wrinkle was that Diamond had apparently seen the orange light and was now a Bitcoin fan. It seems that the former president is now disavowing the entire narrative. In a truth social post on Monday, Trump said, I don't know who said it or where it came from, perhaps the radical left, but I'd ever discussed or thought of Jamie Diamond or Larry Fink for Secretary of the Treasury. Ben Cushing, a director at the Sierra Club, tweeted, Trump says he doesn't know who said he would

consider J.P. Morgan Chase CEO, Jamie Diamond for Treasury Secretary. Dot, dot, dot. It was him. He said it. As we discussed before, at the time, it kind of seemed like Trump simply being agreeable with a reporter or making an off-the-cuff statement. And of course, now that it's being used as a political football, he's walking the whole thing back. I think if you take away anything from this, many of us tended to think that the possibility that Jamie Diamond would end up as Treasury Secretary was actually a lot higher than the idea that he had changed his mind on Bitcoin, leaving the odds that Diamond had been somehow orange-pilled basically at zero. All right, friends, that is going to do it for today's breakdown.

Appreciate you listening as always. And until next time, be safe and take care of each other. Peace.