The Breakdown - The Return of Bitcoin ETF Optimism

Starting point is 00:00:04 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. The breakdown is sponsored by nexus.io, Arculus, and FtX, and produced and distributed by CoinDesk. What's going on, guys? It is Saturday, April 23rd, and that means it's time for the weekly recap. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, a review would be nice, you know, just a nice word or two. Or if you want to dig deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.com slash breakdown pod. Also, as always, in addition to them being a sponsor of the

Starting point is 00:00:50 show, I also work with FTX. And finally, if you are not registered yet, I highly suggest you check out CoinDesks Consensus 2020. It's happening June 9th through June 12th in Austin, Texas. this year. And what makes this event cool is that it is really about the full breadth of this space, everything from Web 3 to Metaverse to Bitcoin and everything else in between. It's designed for newbies, investors, entrepreneurs, developers, and everyone else as well. If you are interested in attending, you can use Code Breakdown to get 15% off your pass. Go to CoinDesk.com slash Consensus 2020. And again, that's code breakdown for 15% off. All right. So today is a true weekly recap. I want to go over some of the topics that I've

Starting point is 00:01:40 mentioned, but maybe haven't spent as much time on this week. And let's start with a little bit of good old-fashioned ETF optimism. So a few days ago, I discussed how we're sort of in this in-between phase, right? The liminal phase in the crypto space. And I also said that there are two things roughly that happen in that type of in-between phase, and it's speculation about things that might come, and, well, speculation, i.e. speculative investments. A great example of the first type of speculation are Bitcoin ETFs. For as long as I have been in this space, a Bitcoin spot ETF approval has always been the thing right around the corner. And this most recent cycle in the market saw even more optimism than usual with that, given Gary Gensler's

Starting point is 00:02:29 history with Bitcoin and crypto when he was announced as the new SEC chair under President Biden. There was a sense that this was a person who had taken the time to really understand the space. But, of course, as we've seen since then, it's pretty clear that there's still a mountain of skepticism from Gensler, particularly with regard to a spot ETF. And of course, the progress we did make was to see a Bitcoin futures ETF, but that's still quite different and not what people were really looking for. There was a piece earlier this week on CoinDesk, however, called Optimism for U.S. spot Bitcoin ETF grows with approval of Tukrium Futures Fund. So what happened? Well, earlier this month,

Starting point is 00:03:07 the SEC approved another Bitcoin Futures ETF from Tukrium. So what, right? It's just another futures ETF. The one difference is pretty technical, but potentially really relevant. Tukrium filed its application under the Securities Act of 1933 and the Securities Exchange Act of 1934, rather than the Investment Company Act of 1940. All previous Bitcoin future ETFs have been approved under the Investment Company Act of 1940. Gensler last year said he thought that the 40 Act had better investor protections enshrined within the law and better market surveillance tools. So here's how people are interpreting this. Craig Somm, the chief legal officer for grayscale investment, said, the SEC is now not only comfortable with futures-based ETFs regulated under the 40 Act

Starting point is 00:03:54 and all the investment protections there, but also futures-based ETFs regulated under the 34 and the 33 Act, the same act that these spot-based ETFs will be regulated under. It's a really positive step forward on the path of ultimately getting approval for spot-based ETFs. Dave Abner, the head of Global BD for Gemini, and who previously spent two decades in the ETF industry, agreed, saying quote, approving tukrium is a very clear sign that there's no slowing this movement. I think one will be approved by the third quarter. Not everyone, however, is as optimistic. Some, like George Sutton, who's an institutional research analyst at Craig Hallam, thinks that it's going to take governmental change first. Quote, we believe pro-cryptopoliticians will appeal to a large

Starting point is 00:04:37 number of single-issue young tech-centric voters, and that change will come, but it will likely require patience. Meanwhile, though, our Australian friends join Canada in no longer how having to wait for a Bitcoin spot ETF. Two such products are launching next week in that country. Cosmos Asset Management is launching an ETF that invests in the Toronto-based purpose Bitcoin ETF, which is a spot Bitcoin ETF based in Canada, and 21 shares is launching a Bitcoin ETF in Ether ETF, which will hold the underlying. Coinbase will act as a custodian. 21 shares has 30 global exchange traded products and about 2.5 billion in assets under management. It's also run by a super sharp guy, Hanny Rashwan, who is a previous breakdown guest if you go dig into the archives.

Starting point is 00:05:21 As Bloomberg analyst Eric Balcunas pointed out, Australia is now the eighth country to approve a Bitcoin Spot ETF. Looking for ways to step up your crypto game? Then go with Nexo. For starters, you get free crypto for each purchase or swap. How about earning guaranteed yields? Up to 17% paid out daily. Ideal for you hardcore hoddlers. You don't even need to sell. Instead, borrow instant cash against your assets.

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Starting point is 00:06:39 The breakdown is sponsored by FTXUS. FtXUS is the safe, regulated way to buy and sell Bitcoin and other digital assets with up to 85% lower fees than competitors. There are no fixed minimum fees, no ACH transaction fees, and no withdrawal fees. One of the largest exchanges in the U.S. FDX U.S. is also the only leading exchange that supports both Ethereum and Solana NFTs. When you trade NFTs on FTCS, you pay no gas fees. Download the FTCS app today and use referral code breakdown to support the show. In other in between regulatory news, the Financial Conduct Authority in the UK has named an interim head of a new digital asset unit. Remember, speaking of our theme of liminal, the UK has been in an extra weird spot. On the one, On hand, the FCA registration process for crypto companies had a big deadline expire, leaving

Starting point is 00:07:31 huge questions around the standing of firms like copper and revolut. On the other hand, however, Rishi Sunak, the Chancellor of the Exchequer, came out last week promising to make the UK a new global hub for crypto. So clearly there are some politics around this right now. In any case, according to her LinkedIn page, the UK's Financial Conduct Authority has appointed Victoria McLaughlin as interim head of its digital assets department. So, like I said, one type of speculation that happens during these liminal periods is about wondering about regulatory approvals and things like that.

Starting point is 00:08:03 But if all the industry did during this type of in-between would sit around and wait for those approvals, it wouldn't be very productive at all. One of the major themes of this particular cycle is the relentless capital raises that have just continued unabated. These matter, and I think will make this sideways slash downturn period different than previous crypto winters, because ultimately what rejuvenates attention in and energy in markets is new things coming to market that attract new market participants or new excitement from existing market participants.

Starting point is 00:08:34 And capital is an absolutely key ingredient to get there. Over the last weeks, we've seen a ton of fundraising. Avalabs, the lead developer of the Avalanche blockchain, is apparently in the process of raising $350 million. Voyager Innovation raised the $210 million round. Moon Pay, which is a crypto payments company, raised an $87 million series A led by Tiger Global Management. Framework Ventures, which is a crypto-native fund, raised a new $400 million fund,

Starting point is 00:09:00 half of which is slated to go into the, quote, burgeoning blockchain gaming space, said co-founder Michael Anderson, I believe the next stage of the blockchain industry will be entirely about onboarding new users, and we think that gaming is by far the biggest top of the funnel opportunity. As the economics of play-to-earn models converge with AAA games that are actually fun to play, we expect an explosion of growth for this sector. On that gaming front, reports are that the Sandbox, which is a Metaverse platform, is raising $400 million at a $4 billion valuation. This is just six months after raising a $93 million Series B. So again, the industry is really well capitalized and shows no signs of slowing down.

Starting point is 00:09:38 Shifting gears to NFTs for a minute, Coinbase has launched its NFT platform in beta. Now, easily, the most interesting thing about this to me are the socially integrated features. There are tons of social interactions built in. There is a 4U feed for discoverability, and each NFT has comments. This has generated a ton of buzz. FudgeDX writes, not even joking, this Coinbase Instagram thing might be genius. Jason Yanowitz, the founder at Blockwork, said something similar. Coinbase didn't launch an NFT platform.

Starting point is 00:10:08 They launched Web 3 Instagram. Now, the flip side is that there was a lot of making fun of the incredible rudeness of a lot of people's comments on the NFTs. Cross-Eath and NFT trader writes, OpenC is where you get the most liquidity. Looks rare is where you get the best rewards. Coinbase NFT is where you comment on your friends' NFTs telling them how ugly they are. You might not be able to filter by traits, but at least you can tell someone their NFT is hideous.

Starting point is 00:10:34 Arcanic NFT, meanwhile, says never using Coinbase NFT again. Just listed my NFT for 0.01 below floor and someone call me a poohy in the comment section. NFTs will hit a bull market again because everyone will be too scared to list in fear of getting cyber bullied. All jokes aside, I am super excited to see if this social side of NFTs takes off. I think it could be really interesting. Finally, a kind of a big story from Friday. Stripe has launched crypto payouts, and I'm going to give the news through the lens of Jeremy Aller from Circle who wrote this thread. He writes, major news today for mainstream adoption of USDC, with Stripe announcing crypto payouts with

Starting point is 00:11:14 USDC, launching with Twitter as the first pilot customer. It's rewarding to see some of the most important internet companies in the world using Circle. A long-held promise of digital currency like USDC has been removing friction and enabling anyone anywhere to easily receive payments. Twitter creators exist everywhere the internet exists, and existing payment systems are expensive and complex to reach people easily. USDC provides an open platform for connecting people with value, with Twitter users being able to bring a digital wallet and receive payments. By building on USDC for Polygon, it allows for large-scale transactions at penny's cost. Yes, crypto payments can reach internet scale. Having one of the most important payments companies in the world, Stripe, adopting USDC is an

Starting point is 00:11:55 indicator of things to come. We at Circle share their mission to grow the GDP of the internet and believe USDC is going to become a key building block for internet commerce. A CNBC piece about this captures the importance of this shift relative to Stripe's position on crypto before. Quote, it's Stripe's first significant push into crypto since dropping support for Bitcoin four years ago. The San Francisco-based startup stopped accepting payments via Bitcoin in January 2018, citing the digital coin's notoriety for volatile price swings and a lack of efficiency in making everyday transactions. But the firm has since warmed a crypto amid hype over Web 3, a movement in tech that calls for the creation of a decentralized version of the internet

Starting point is 00:12:33 based on blockchain technology. Stripe last year formed a team dedicated to exploring crypto in Web 3. In November, Stripe co-founder John Collison hinted the firm may soon offer crypto support again. Karen Sharma, a product manager at Stripe's Crypto Unit, said in a blog post Friday, while the store of value aspects of cryptocurrencies typically receive the most attention, we view the prospect of open access global financial rails as becoming at least equally compelling. As a result, we've been exploring ways to use cryptocurrency-based platforms to unlock broader access. I think it's a huge development and not just because Stripe being involved in crypto is a sign of adoption. I think Jeremy is dead on that it's incredibly difficult for these

Starting point is 00:13:14 companies whose audiences are all over the world to easily interact financially with them. This is a use case where crypto does potentially solve a major pain point. And as an aside, going back to what seems to be my favorite conversation, which is how USD stablecoins could extend the reign of the U.S. dollar for another generation, the fact that these payments are all being made in a U.S.D-linked stable coin is pretty interesting as well. Anyway, there you have it. Kind of a quiet week. Like I said, it's this liminal in-between moment for crypto. But that's a good time to sit back and ponder things, and I'm glad you're here doing that with me. I want to say thanks one more time to my sponsors, nexo.io, Arculus and FTX. And thanks to you guys for listening. Until tomorrow, be safe and

Starting point is 00:13:58 take care of each other. Peace. Hey, Breakdown listeners, come join CoinDesk's Consensus 2020, the festival for the decentralized world this June 9th through the 12th in Austin, Texas. This is the only festival showcasing and celebrating all sides of blockchain, crypto ecosystems, Web3, and the Metaverse, and is designed for crypto newbies, investors, entrepreneurs, developers, and creators. Don't miss speakers like Kathy Wood, SBF, CZ, Punk 6529, and Joe Lubin to name just a few. Use code breakdown to get 15% off your pass

Starting point is 00:14:36 at coin desk.com slash consensus 2020.

The Breakdown - The Return of Bitcoin ETF Optimism

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