Unchained - Bits + Bips: Is This the Real Reason the SEC Approved the Ethereum ETFs? - Ep. 656

Episode Date: June 5, 2024

In this episode of Bits + Bips, hosts James Seyffart, Alex Kruger, and Joe McCann, along with guest Hal Press, founder of North Rock Digital, dive into the intricate challenges of pitching the ETH spot ETF to traditional finance and the Federal Reserve’s anticipated next steps. They discuss why Biden vetoed the repeal of SAB 121, and why that veto lends credence to an alternative theory as to why the SEC approved Ethereum ETFs.  Also, they talk about why the spot ETH ETFs are already turning out to be different from the Bitcoin ETFs, Hong Kong's (and perhaps China’s?) crypto ambitions, recent U.S. macroeconomic indicators, and whether or not Roaring Kitty’s recent antics with GME stock are illegal—and how he’s impacting memecoins.  Show highlights: Why Biden vetoed the repeal of SAB 121 and whether it was priced in The recent political change around crypto and the surprise Gen Z celebrity who could swing the U.S. presidential election The impact of the Trump conviction on the crypto industry Why ETF issuers were caught off guard with the spot ETH ETF approvals Whether Bitcoin ETF buyers will rotate to Ethereum, and when the products will launch  How the ETH ETF will be pitched to TradFi  Why Alex thinks ETH/BTC will go up  How Hong Kong is trying to become the Wall Street of crypto, according to Joe The recent macroeconomic indicators in the U.S. and their implications for crypto The massive glitches in the NYSE that showed Berkshire Hathaway going down 99% Whether what Roaring Kitty is doing with the GME stock is illegal Hosts: James Seyffart, Research Analyst at Bloomberg Intelligence Alex Kruger, Founder of Asgard Joe McCann, Founder, CEO, and CIO of Asymmetric Guest: Hal Press, Founder of North Rock Digital Links Politics:  Unchained: President Biden Vetoes SAB121 Repeal Unchained: FIT21 Bill Heads to The Senate: Should We Really Be Excited? POLITICO: Crypto super PACs get $25M boost Fortune: Coinbase donates $25 million to super PAC Fairshake days after Biden vetoes crypto custody bill Ether ETFs: Unchained:  Ethereum ETFs Likely Protect Ether From the SEC. But What About Staked ETH?  Why the SEC May Not Be Done in Its Legal Battles Over Ethereum Why ETH Spot ETFs Could Benefit Stakers and Make Ethereum More Resilient ETH ETFs Will Be Approved. But Could Grayscale Outflows Depress the Price of ETH? Blockworks: What we learned from the latest ETH ETF filing dump Hong Kong Bloomberg: Hong Kong Says 11 Crypto Exchanges Are Closer to Getting Permits Other recent events:  CNN Business: Berkshire Hathaway: NYSE says glitch that showed stock down 99.97% has been resolved  WSJ: E*Trade Considers Kicking Meme-Stock Leader Keith Gill Off Platform  TIMESTAMPS 00:00 Intro 01:59 Why Biden vetoed the repeal of SAB 121 and whether it was priced in 08:43 The recent political change around crypto and whether this particular Gen Z celeb could swing the U.S. presidential election 12:07 What the impact of the Trump conviction had in the crypto industry 15:38 Whether Bitcoin ETF buyers will rotate to Ethereum, and when the ETH ETFs will launch  25:53 How the ETH ETF will or should be pitched to TradFi  31:02 Why Alex thinks ETH/BTC will go up  32:48How Hong Kong is trying to become the Wall Street of crypto, according to Joe 36:27 The recent macroeconomic indicators in the U.S. and their implications for crypto 45:15 The massive glitches in the NYSE that showed Berkshire Hathaway going down 99% 49:26 Whether what Roaring Kitty is doing with the GME stock is illegal Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey all, Laura here. This is the third episode of our new Crypto and Macro show, Bits and Bips, exploring how crypto and macro collide one basis point at a time, with hosts James Seyford, Alex Cougar, and Joe McCann. Today, they have a guest, Hal Press, of North Rock Digital, and they get into all of the many crazy happenings from the veto to Roaring Kitty since the last episode. This will be the final time that I introduced this new show, so don't forget that Bits and Bips will be on Unchained every other week. usually on Wednesdays. Be sure to like, subscribe, and give it a rating or review or a shout out on social media. And now enjoy the super fun conversation. The commission is usually two Dems, two Republicans, and then whatever president is in power gets to choose the chairman of the

SEC. In this case, it's Gensler Democrat. So theoretically, he was a swing vote in Bitcoin ETFs. It's not necessarily true 100% that he was a swing vote here. So theoretically, Crenshaw was never going to vote again. She wrote a dissent letter. But Liz Zerogh. who is another, the other Democratic commissioner, did not join her in her dissent of this Bitcoin ETS. She voted, he voted against it, but he didn't join her in her dissent letter. What's interesting, what I'd heard from other people was that this could have come from Lizaraga, who spent, I don't even know, a very long time working. She used to be Nancy Pelosi's right-hand man. And a lot of what I was hearing, even leading up to the East stuff, was that

Dems in the Senate and the House were getting really concerned with how the crypto polling was showing up and how many people own it. Hi, everyone. Welcome to bits and bips, exploring how crypto and macro collide, one basis point at a time. I'm your host, James Safer, Tradfai, Archmaister, Lord of Bloomberg's End, here with Alex Kruger, Kruger, of House Asgard, Protector of the Realm. Hi, everyone. And Joe McCann, Lord of Commander of Asymmetric and Master of Bunk. Hey.

And joining us today is Hal Press for North Rock. How are you? All right, we're here to discuss the latest stories in the world of crypto and macro news. Just remember the nothing we say here is investment advice. Check untrainedcripto.com slash bibs and bibs for more disclosures. All right, guys, it's pretty easy to figure out, like, where we're going to start here. I feel like we kind of have to start at what's going on with the veto of SAB 121 and just the overall political landscape. We spent a lot of time talking about it last time we did the show with relation to E.

But obviously, the Biden vetoed the House and the Senate's votes to overturn SB 121 in Congress. Remains the scene what happens next. I guess there's going to be a push to possibly try to override that veto, but I don't think they had the votes to do. it from what I know. I guess I'll turn it over to you guys. Do you think this was priced in? How did you view it? Yeah, I think it was. Well, I mean, I obviously, philosophically, I wanted him to not video it. But when you understand kind of like how DC works, it would be like an extreme sort of about face and kind of tuck in his tail between his tail between his legs if he didn't fall through, follow through with this veto. So it was kind of like he had to

even though, you know, a few days prior, he had said effectively, like, we're looking forward to working with Congress on a comprehensive digital assets framework, you know, initiative, et cetera, et cetera. And you didn't see this really change in the price. And of course, naturally, they dumped this news on Friday afternoon after like, you know, the end of the week, markets are closed, closed. But also when they're less liquid. And so, you know, I was actually a little concerned because he had effectively until today, Monday, to actually meet the deadline as to whether or not he would veto it. And historically, this type of news comes on Fridays after the close. So I didn't see any real change in the price action. Nothing really mattered too much.

And that's why I think it was kind of priced in that the veto was probably coming or that the market didn't care. It could also be the case that the, you know, the momentum ignition algos were just off on Friday as well, didn't care to be trading against this type of news. But even, you know, as we say here today, we had Bitcoin clear 70,000. It got offered a little bit. It's trading above 69 right now. So it doesn't feel like this was a huge news event that that drove price. Alex, what do you think? I agree. I mean, I mean, price couldn't care less. So that says everything we need to know. And the other thing I think we should point out is that basically Biden has said explicitly that he would

be to it. Yep. So it kind of like, you know, makes sense for the market to be expecting it. And something else I like to say is that I don't think really changes the change in attitude from within the Democratic Party towards crypto. One thing is Biden and a different thing is a party as a whole, right? So I think we're not mistaken when we believe that things are changing politically when it comes to crypto. Howell, you have anything to add? No, I generally agree.

I actually don't think that a lot of people expect him to veto. I think actually people have started to come to the conclusion that he wasn't going to veto after the broad shift that we saw in Democratic policy. I just don't think the market really cares about it. I don't think that it was necessarily priced in. I just don't think there was ever really an event to be priced in or not priced in. I think people kind of know where the Democrats stand for the most part. I mean, the ETTF obviously, you know, was a big about face, but I don't think there's going to be, I don't think the market expects too much follow through beyond that.

And then we obviously know where the Republican Party stands. And I think it's just focused on the election and most of this stuff up until that's kind of noise. And crypto has a tendency to shake off regulatory stuff anyway. It's just like general. context. Yeah, I'll give you guys some inside baseball. I actually met Joe in person for the first time at Consensus last week. And I was with him on Friday afternoon right before this news came out. And he's like, I'm hearing that Biden's going to veto it today. And I was like, really, it's already a little late. I would have expected it by now. He's like, I don't know. That's what

I'm hearing. And then sure enough, before I even got back to my room, the news dropped. So kudos to Joe on getting that call, right. You have to have friends in D.C., man. It's the only way. Yeah, I would also say, so like my whole view was there's, there was two theories here on that flip of the ETH-T-F that Hal was just talking about. Obviously, we spent so much time talking about. The obvious one is quickly like the Biden admin decided that this needs to change. We can't be completely anti. But there was this alternate theory that I think has more credence now for there's, it's been it's been around since basically we started seeing a reversal here. And it's more so that it might not necessarily have been the Biden admin that fully pushed this. So, the commission is usually two Dems, two Republicans, and then whatever president is in power gets to choose the chairman of the SEC. In this case, it's Gensler, Democrat. So theoretically, he was a swing vote in Bitcoin ETFs. It's not necessarily true 100% that he was a swing vote here. So theoretically, Crenshaw was never going to vote again. She wrote a dissent letter, but Liz Araga, who is another, the other Democratic commissioner, did not join her in her

dissent of those Bitcoin ETFs. He voted against it, but he didn't join her in her dissent letter. What's interesting, what I'd heard from other people, was that the theory was that this wasn't necessarily from the Biden admin. The Biden admin may have rolled over a little bit, but this could have come from Lizaraga, who spent, I don't even know, a very long time working. She used to be Nancy Pelosi's right-hand man. And a lot of what I was hearing, even leading up to the East stuff, was that Dems in the Senate and the House were getting really concerned with how the crypto polling was showing up and how many people own it. So there's this other theory now that I think with the Biden admin not actually vetoing like they said, which who knows what that means. I mean, part of me is agree with you guys. Like he said he was going to veto it.

He can't just not veto it. Now it just doesn't look great, right? Right. But part of me is like maybe this wasn't actually they're doing 100%. It could have been just like the House and the Senate being like, we're going to lose elections if we keep allowing it to go down this. And I know for a fact, the Elizabeth Warren wing of the party, those are still. upset with the way this has been handled and didn't want this to be approved. And it kind of gives more credence to that potential like back dealing stuff that went on and the

fact that as they issued the approval by delegated authority, which means there is no actual voting. So right now we can't see what the actual voting breakdown was. Was it 3-2 with Lizaraga breaking from the SEC chairman? Who knows? Or what at that point would Gessler have just voted and gone 4-1 with control of the sole dissenter? Who knows? We don't have a vote right now. Theoretically, we could if somebody wants to challenge it, but there would need to be some political viability for that. So that's just another theory to throw out there. I was just going to say another interesting thing that you're touching on James with respect to kind of you're going to keep these guys, they're just going to keep losing elections or losing

voters. I saw some polling last week before the veto was announced that about a third, 33 percent of Americans are seeing crypto as something that they would consider with respect to whom they vote. And that was shocking to me. But then if you also kind of dive into the data of people that own crypto in the United States, they tend to skew younger. And I was chatting with a policy guy out of D.C. And he said, I was like, Joe, do you know who could actually swing the election for, you know,

for Gen Z voters? Because this is where a lot of the Biden administration is losing favors with younger voters. And I was like, well, it's Taylor Swift, right? And he said, no. Do you guys have a guess of who it could be? No idea. Who this guy said it would be? I don't know.

I think consensus is Taylor Swift. It turns out that Zendaya pulls higher than Taylor Swift. And so there's this now this notion of the election potentially being swung by Zendaya, which is just fascinating to me. And another reason, like, this is so fascinating is it goes to show how, you know, one, bifurcated the electorate actually is and how it comes down to a handful of states, but also something like a Gen Z influencer, you know, celebrity can actually flip the election. But two, I think it leads into some of the other stuff that's been happening recently around the money that's flowing into crypto, right? So you had A16Z put $25 million into the Farishate CryptoPack. Coinbase just put another $25 million into the crypto pack.

And so it's almost like the kind of heavy hitters in crypto are seeing the value of having that crypto pack, which was the third most valuable crypto pack, certainly up until they just got this extra $50 million. It's almost like they're doubling down because they're saying, like, look, this is actually starting to be a real issue. Trump is raising money with crypto. The Biden administration is being forced to actually turn 180 on their views of crypto in some respects. And so there's just more and more money flowing into it. Yeah. And you were saying that was like one of the third largest pack, not just crypto pack. This crypto pack was the third largest before these two numbers

came out. That's right. And the whole goal is to get rid of politicians that are anti the space, which is just fascinating. There's obviously a lot of money here. It's starting to show. up. I mean, there's tens of millions Americans that have it. One in, I think, a little bit less than one in five Americans have some exposure. So it makes sense that it's finally seeing its day, but it's still a little surreal to see somebody like Trump come in talking about your right to self-sovereignty and holding your self-custody and all these other things. It's kind of crazy. I wanted to say something funny I saw the other day with an article basically saying the following. People who are obsessed with celebrities may be less intelligent studies. suggest. What a surprise. So, yeah, when does tell us about the U.S.?

Well, I think we also, we got to, we got to, I think we got at least touch on since we're still talking about politics here and its influence on crypto, like the Trump conviction. So, irrespective of your views on Trump, like he, he got slapped with 34 felony counts,

which sounds like a lot. And I think within 48 hours, he raised like $35 million. Like, do we even think this has an impact on crypto? Like, what do you think, Al, I'd actually love to get your take on this. Like, what do you think actually this could mean? Because there seems to be a lot of people gravitating towards voting for Trump,

even though they've been lifelong Democrats or they would never vote for him in the prior election. Now they're leaning into it. And he just raised an enormous amount of money getting 34 felony counts. I mean, so I typically defer to the odds markets to understand. and if things have impact on the election, because I think there's a lot of people that do this for a living. There are lots more plugged in than me on how these things impact the election. And the odds barely moved.

So that also fit my intuition that I doubt that this verdict has too much impact on the election. Because I think people already just assume that he was going to get convicted. And also, even if he does, like, his holder base doesn't care. And I mean, he just tried to suspend it as a positive. And it may be a positive for him. Truly, all press is good press. But I do think that the election matters.

I just don't think that this impact the election. But I do think that the election matters for crypto. I think Trump would represent a more positive regulatory environment than the Democratic administration. And so I do think it matters. But I just don't think that this. verdict has any impact on it. Yeah, I think the only impact is simply that he could raise more money, as you said. So I mean, and honestly, like, he's just, he's just going to spin this constantly. But like, it depends, I guess, how they're going to, how they're going to do this, right?

And how they're going to spin it. I mean, the Biden admin could have jumped on this and they basically didn't. So there's a reasoning there. Are they, is it? Does it wonder, do they see it as like not that necessarily big of a win, despite a lot of other Dems seeing it as a win? Or are they rather him just talk about this rather than talking about inflation and, border and things like that, I'd rather than complain about his conviction and then talk with the other things that are obviously hurting Biden. I just wanted to say that I think is, I'm going to my head, I would think that the conviction, it helps Biden a little bit, like, marginally. Yeah, the interesting thing is that the narrative

online is that basically this is good for Trump. Because the conviction shows that the system is rigged and therefore this is positive for Trump. I just don't see it, but I don't see it. find it interesting how the narrative has been spinning this around. What do you guys think? Well, I do think we could, to Hal's point, we could just go to the markets. Look what happened. Bowden, the Biden meme coin, like, ripped and then Trump, this is at least on Solano, like, Trump meme coin was dumping, like, right on the news. And I don't know if they've, I don't know what has happened since then, but it is kind of interesting to see, like, how instantaneously a culturally significant event is then immediately monetized through things like meme coins.

All right. Let's talk real quick about the ETHs. We talked about them last week. And we even kind of talked about them the first episode, too. So I guess the first thing is like, I think these ETF issuers are trying to figure out how a way to pitch this. I mean, I kind of got into this. My panel on stage at Consensus was with the Chiefs of Legal Officer. at Bitwise, a managing director at BlackRock, Joe, Cynthia, who runs Fidelity's digital assets,

and Carolina at B&YMel. So these people are way up in the business. They were all caught off guard by this approval. I don't know how well prepared they are for these approvals, but I can tell you they were all completely caught off guard. And I'm not sure they know exactly how they're going to pitch this. I mean, with Bitcoin, it's really easy, right? Like digital gold, simple one-liner.

There's a lot of talk about there about what's going to be. I've heard digital oil. I've heard an application. I've heard, you know, there's a whole bunch of different things out there. One, how do we think this is going to be pitched from these issuers? What's the one line that they're going to use for advisors and institutions? And where do you guys think now that we've had a little bit of time to settle and look at this and think about this? How do we think these flows are going to compare to the Bitcoin ETS?

Can you, James, can you let me flip the question here and send it to you? I'm very curious to know what you think. if you have to highlight a single data point that illustrates why they were caught by surprise. Yeah. So, I mean, the SEC was basically telling them not explicitly, but in the way that they were answering questions, the way that they were dealing with all these issuers, they were telling them this isn't going to be approved. It's not happening. I said this on the show last time.

Like, I'm pretty confident that there was likely. denial order set up. I've talked with people in and around the SEC. There's departments of the SEC. They were not ready for, didn't know this was happening until Monday when news kind of broke when we broke the news on Twitter. So I mean, I'll give you an example, Joe, Joe from BlackRock, he said on stage, you can find the recording from the consensus. He said a month, a month ago, I told my team to stand out in East stuff because it's not happening. We don't need to keep wasting our time, like trying to prepare for something that isn't going to happen. So if Blackrock's telling all their guys to just completely give it up. It's not happening. That just tells you that the SEC

was very blatantly signaling that this isn't going to happen. So if you talk to anyone in DC, anyone in and around the SEC, anyone in and around these ETF issuers, they were all, this isn't going to happen. They're all staunchly of the opinion that this had to have been political in some nature one way or another. And we talked about before like what actually happened. We don't know exactly what happened behind the scenes, but this was a political decision. I don't think this would have happened if we weren't in an election year. How? You had another question.

Yeah. I mean, there's a couple of questions that I'm curious to discuss, which is what do we think the flows look like, but also the composition of the flows. I mean, do we think and what, I mean, some people will, but what is the, how do we think about the portion of people that will actually rotate, right? Like there's only one ETF that you buy right now. There will be two.

I think there's at least some people that own the Bitcoin ETF. they want exposure to crypto. They don't really have a strong view about Bitcoin. They just care about crypto. There's obviously some people that do have a strong view about Bitcoin. I think there's like, you know, none of this stuff is binary. It's about trying to figure out, you know, where these lines are drawn. But I'd be curious, James, on your take on sort of like what the flows will look like and then also the composition of them. Like how much is incremental money? How much is rotational? Or what time period? And then some of the nuts and bolts about it, like do all these brokerages have to go through a new process to onboard east the way they did

Bitcoin or is it easier now after they've already done Bitcoin once? Just be curious to hear your take on that and I know I have allowed to pay it. Yeah. So I don't think there's going to be as much rotation as some people think. Obviously there's going to be some out there, particularly people who put more than just a percent or two or three percent into a Bitcoin ETF for their portfolios. But if you're that low, like do you really want to like diversify into another thing? more likely you're just going to add to the bucket. And we've seen this across the board.

If there's been studies and surveys of advisors who went into this space before we even got the ETFs, it's far, far more common that these advisors were adding to positions or if it ran up, if they started off their allocation at 1% or 2% and it ran up on them, it's far more likely that they were just letting it run up and not fully rebalancing or increasing those allocations across different portfolios. So my view is I think there will be some of that rotational coming out of some of these Bitcoin ETFs, maybe. But honestly, I don't think it's going to be that much. That said, I do think the demand for Ethereum ETFs are going to be less than the Bitcoin

ETFs. I know I've heard some people thinking, like, we're going to get tens of billions flowing into these newer ETFs the way we saw with the Bitcoin ETFs. I can pretty much guarantee that's not going to happen. Yeah, I can guarantee that as well. There's just a lot of nuance about whether it's like 10, 15, 20, 25. 30, 40, 50, like, there's a lot of nuance in there. Yeah.

That's, I think, why so. But it's obviously not going to be the same. I'll throw a number out there. Yeah. Eric, Eric, my boss has 20% as like a higher end number for him. I think 20 to 25% of the flows that went to Bitcoin will come into Heath over like the same, like a similar time frame. So if we take like six months out, I think you could still get, you know, 20, 20, 20, 20%, 20%, 25% of the flows that went to Bitcoin. And what informs that number?

I know there's the European comps, which are like closer to 30. Yep. So I'm curious what informs it. Yeah, Canada, too. We can look at Hong Kong. Hong Kong was up there. There were some numbers much higher than that number. Numbers higher than your like 2025, you're saying?

Yeah, exactly. I mean, part of it is one, and some of it's slightly anecdotal because the interest that I'm seeing from our clients and advisors is far less in ETH for now. I think that will change. There is like cash flows that come with ETH and things like that. But I talked about this last time. When you take it and put it in an ETF wrapper, like you're losing some of the benefits of ETH. It's like Salana.

Right. But that's also true for the European ones. Yes. Some of them have do have staking. It's true for all of them. Do they? Yes. So there's some staking ETFs in Europe and some staking.

There's a staking ETF in Canada. They don't have that much in the way of assets. But I think a lot of the money that went in. And just said I'm curious about those work. They just return it as like a dividend yield. Yeah, exactly. Ash dividend yield. So they take the, the, you sell it.

Theoretically, they could. They could do both. So basically, there's accumulation shares where they would just accumulate and keep adding to the, to whatever, or they would, you can do distribution. So it's really up to however you want to do it. But you're not going to have those in the U.S. So I just think the demand will be slightly less than the ratio of actual spot ETH to spot Bitcoin. I mean, another point that supports that in my view.

And I'm curious on this. The ones in Europe, did they launch at the same? time, Bitcoin and Ethan. They launched slightly after in most cases. And also they launched before staking was even a thing in many cases. Like the Swedish ones were around in 2015, 2016, I think. So like some of the stuff, it's not apples to apples because right now that that comparison isn't the same.

But no matter what, there's going to be people that can't get exposure to the direct asset themselves or as we can say now, it's a commodity. But they'll be looking at the ETS. but anyone who can get exposure to the direct asset, that'll be interesting. Another thing is, like, I'm sure there will be a lot of people like doing trades, pairs trades and derivative trades off of these ETS when they come out, you know, shorting the ETF and going along the asset and then all of a sudden you're just getting yield exposure. There's going to be a lot of unique things that will happen out there.

We've seen a whole bunch. We've seen a bunch of leverage filings already. We've seen a bunch of covered call filings. It's, you name it. It's already happening for the Ethereum ETS in the same way that happened for the Bitcoin. And do you think there's any impact of the fact that, like, in this case, Bitcoin went first, a lot of people allocated to it, and that might already be their crypto allocation. Like, people are less likely to allocate crypto now that they have some than if it was

more like the pool of sort of dry Tinder is lower this time around. I think that's part of it too. I don't know how much of it, but I do think, like I said, there are people out there that kind of just view it as I have exposure to this asset class now. Maybe I'll diversify, but I don't feel any need to right now. And do you think that on the rotation point, there's any issue with the tax consequences? Like if you bought Bitcoin early, now you're going to have to lock up the short-term cap gain to sell it. Exactly.

I think that's part of the reason why, yes, I agree with that 100%. Like maybe you see more of it a year from GBT launch or from the conversions because then you can do a long-term cap gains rotation. But for the most people don't have a big enough allocation where they're going to try to diversify it. Like I can't imagine having a 1% allocation or 2% allocation to something and be like, all right, I'm going to sell a chunk of this and buy a sliver of this. I'm probably more likely just going to add exposure in some way. That's the way I personally do it. So I'm probably biased. But I'm sure there will be rotation.

We'll probably see some outflows. But there's no way to know. We'll find out in a month or so or whenever these things launch. Yeah, that's another question I had. Last one for me. And then how does the whole turn it over? So when do you think these are long? We don't know.

There's no way to know. They started the process. So last Friday they all had to submit their S1 amendments with things that comments from the SEC. And then usually there's a few rounds of that. It could be just one or two rounds because we already have the futures ETF and we have spot Bitcoin and there's a lot of overlap there between the spot Eath, but there's still a lot that needs to be ironed out. But theoretically, I think early July it could happen, possibly earlier. We'll know more soon. Like, we'll know when we know, I'll be putting stuff out as soon as we know.

And the main difference here that they're working out is the disclosures. Yeah, everything about the fund. Disclosures about the actual protocol of Ethereum versus whatever and anything along those lines. It's just really basic risk disclosures. It's boring shit, to be honest, I think. Okay, say enough. Yeah, so I think people are mid-curving this. I think it makes sense to look at, say, the Bitcoin ETF flows and try to back out some

percentages. That makes a lot of sense to do that. But there's one huge difference, in my opinion. And it was the original question that you led with, James, which is, how do you market this thing? Right? Bitcoin ETF flows. I mean, Bitcoin has been on CNBC and Bloomberg and traditional media, traditional financial media for a long time as this digital gold narrative. And man, that is so easy for a baby boomer to understand.

Oh, it's like, it's a digital version of this rock, right? That is like an inflation hedge or whatever, right? And I think that that is an underappreciated aspect of people that are trying to back out this percentage of how many flows will come in. And yes, we do have comps like Canada and Europe, which I think is. totally valid. But this gets back to that question. How do you market this thing? And I have struggled to even try to explain, say, the Ethereum Roadmap or what is the tagline of Ethereum? Is it digital oil? Is it, you know, the software layer for crypto or whatever? Like, is it all of these things, right? I think one of the challenges that the Ethereum community has run into beyond the

technical limitations is a constantly kind of like. flip-flopping narrative, right? There was the ultrasound money narrative, which Bitcoin won that. And then it's like the world's supercomputer. It's like, well, it's too slow and expensive. So I don't know how you explain, like, how do you create a product that you're going to pitch to people that is as simple as something like digital gold? I think the key to this one is whether or not, and I don't think that they're going to be, but whether or not they're willing to like in a backhanded way take shots at Bitcoin, which I don't think they will be because obviously Bitcoin is their red winner and like their main product.

But like if you wanted to pitch E consistently, you would just call it programmable Bitcoin, like or something like that. Like and like then you can very easily like get a lot of flows from those Bitcoin people. But I don't think it makes a lot of sense for them because obviously that doesn't help them to just cannibalize their main product. So it's interesting. Like you can pitch it just as like, I think the easiest pitch, frankly, it's just diversification.

Like, okay, you have digital gold. And then this gives you more access to actual, like, crypto utility. And you can have both of them and then you have like broad-based crypto exposure. I think that if I was kind of like designing it, probably high thing. But there's a lot of other stuff around, you know,

the actual pitch. It's like, like you mentioned. Like, you know, digital. oil or these things. They may do that too, but I would imagine it's more just like the programmable settlement layer of crypto, something along those lines. Alex, you have, you have any thoughts here? I don't think it's that important, to be honest. I think people are over, like overstretching the importance of how you pitch ETH. You can say it in so many ways. Like, for example, eth is

programmable decentralized financial social network or decentralized banking you know it's

by the way the decentralized oil or digital oil I think is the worst of them all that makes absolutely no sense to me that one seems

that one seems that before today that's pretty terrible I think to be honest with you though like the best pitch by far is just price. If the thing goes up, people will buy it.

Yeah, and the one thing I would add here, which we didn't even mention, there's a bunch of these issues that launched the Bitcoin ETS that are just aren't even entering this race. And then we got news on Friday that basically, so Arc and 21 shares partner in the Bitcoin ETFs and a bunch of these other crypto futures ETFs. And the updated filing we saw from 21 shares, which is the largest, one of the last largest crypto ETP issuers in Europe, at least by a number of ETFs. They're going on their own. So ARC isn't even partnering with them.

I don't know exactly what the relationship is what happened there. I can tell you there is a close relationship between those two companies. Ophelia who runs 21 shares and Kathy, or one of the co-founder of 21 shares and Kathy would have a good relationship from my experience. So I'm assuming it might have to do with the fees. The fees got so low, so quick that like two firms trying to figure out how to handle 21 bips on however much money. they have, there's probably not enough money to go around for two firms to have their, I guess, fingers in the cookie jar. Investco is doing with Galaxy again on the Ethereum, ETF front. But you also have Valkyrie who is acquired by CoinShares. Coin Shares has products in Europe. They basically

decided they weren't going to enter this race. Part of it probably has to do with the amount of competition. I think part of it they said even outright was because basically if there's no staking, they don't see the, it's going to be even harder. Wisem Tree is out. Hashtex is out. So like we've seen a bunch of these guys that competed in the Bitcoin ETF race that decided it's not even worth their time to go into the ETH side of things. Well, to Alex's point, the price is what matters. So let's talk about the ETHBTC pair, right? So even with the enormous amount of activity that was favorable to Ethereum's price action when the news came out, ETHBTC is only up 1% year-to-date. And it didn't even get back to its January highs. So, Alex, I know you're bullish on

ETHBTC. I want to know when it's going to take out our year-to-date highs and why there's going to be more money rotating out of Bitcoin and into ETH. I think it makes sense for ETHBTC to continue higher into the ETF launch, basically. I mean, that could be a long time. Perfect. It's a long time to go up. That's my point. It's like say July, we have a month and a half. And then I think something else that it makes sense for us to see is basically gray scale selling the same thing that happened with Bitcoin. So ETHBTC topping right around the S1 approvals and the launch makes sense to it. Right now is what, 55? Yeah, almost 55. So take it to like 70. That's pretty good. Before we move on from Ethereum, how do you have a view on the ETBTC ratio?

I do, but I'm sorry, I want to share it. No, you have to. You have to now. Let's get some disagreements out here. This is a safe space. Yeah. No, no, I don't have any stronger. All right.

Moving on, let's go over to Joe. There was some news out of Hong Kong recently relating to crypto exchanges. Why don't you intro this one? You know, I saw this and it stood out to me because Hong Kong had, historically been, you know, kind of kind of like the Biden administration, very kind of anti-crypto. And they've pulled a huge 180 over the course of like probably the past, I don't know, 18 months. And they are, I saw an announcement that they're granting 11 licenses to crypto exchanges in, in Hong Kong, including crypto.com.

I just thought this was newsworthy because, you know, I'm an American. I'm assuming most of us on this call are Americans. We have such a U.S.-centric lens that we tend to forget what's happening outside in the rest of the world. And yeah, I know that the Hong Kong ETFs for Bitcoin, we're only like a tiny fraction of the U.S. And the U.S. is obviously the largest market. But there is something interesting about Hong Kong really going full throttle with their continued efforts to make Hong Kong kind of like the Wall Street, if you will, of crypto. And it's also an interesting timing because of the kind of pivot around Biden administration. Yes, the veto happened.

We already talked about why that was the case. But it just feels like there's just continued momentum for people, I was saying, countries, governments, really starting to recognize the potential value here for enabling the innovation and the stuff that's happening in the space. So I just thought it was worth mentioning just because, you know, crypto.com is one of the folks getting the license, and they are, you know, they sponsor like the arena where the L.A. Lakers play, right? So this started, this is starting to like bleed into the United States, whether we like it or not. And it almost feels like a lot of these countries

are going to be, you know, continue to apply some level of pressure on the U.S. Even though thus far, it hasn't really battered. Yeah. I mean, isn't, that Hong Kong, isn't that where SBF started FTX? Good start. No, no. I, no. I, I, I think there's some more. Particularly, he started it in the Bay Area. Yeah, valid. Yeah, yeah.

I think, well, he started Alameda in the Bay Area. Alameda, yes. Yeah, yeah, yeah. I guess my overall thought is I think it's very intriguing that Hong Kong is doing this, because Hong Kong obviously is now more and more tied to China mainland itself. I think we're still a long ways out from these mainland Chinese investors being able to invest. They're still not allowed to do it. There's a lot of restrictions, capital controls, what have you.

But I'm with you. I think this is likely probably like they're, I don't want to say testing ground, but maybe testing ground is the right word. They're laying the groundwork to see how this could work. And then eventually, theoretically, if they're really, if the Chinese are really ones pulling the strings here in Hong Kong, obviously they are. It could mean something down the line. But I think it's, I don't want to say it's nothing right now in the grand scheme of things

as far as more current markets are concerned. But going forward, I think this could be a very big deal. Yeah, and one other thing, you know, this is a good segue into the macro stuff that I know Alex wanted to chat about. There's been a significant amount of investment flows into China and Hong Kong recently, which we kind of touched on, I think, in the last pod about, you know, this kind of Shanghai core 2.0 happening. And it is interesting that the investment flows in traditional financial products have really started to tick up the Hangsang and the stock exchanges over there have been kind of ripping. Alex, do you think any of this has to do with the broader macro stuff here in the U.S.? I know we've got like, we should probably cover like the PCE print from last week and what that

means? What are your thoughts? I think it has nothing to do with the U.S. to be honest. China definitely pivoted. So that's really good for risk assets and it's good for crypto. On the U.S., we basically, we had PCE last Thursday, and it came in line accepting coal. Core PC basically month and month came a pat lower. And that was basically enough for sending at least rates like really, really much lower by, what is it, like 20 basis points, the 10 year. And that's like inflation coming down is exactly what we want to see, not too much. and more importantly we have payrolls this week.

And I have to say that I tend to think that I don't think it's really that important. I think where the Fed is in a stage where they need to see a lot of data for them to move. And I mean, I'm saying this because they're saying it actually. We have Fed speakers coming out every day or three days a week. and their messaging in the last few weeks has been that. It's like, don't stress about single data points. We are looking at really, we're trying to define our next actions based on the trend. So unless something extraordinary happens, I think we would need to see three data points,

like considerably above or below for the Fed to accelerate their actions. And something else I wanted to point out here that I think is very interesting is that it's basically immigration. Immigration, undocumented immigration in the U.S. I was looking that basically it's added one third of the growth of payrolls comes from there in 23 and half in 24. So what that means is that the U.S. economy, even though it's doing well, is not doing as well as we may tend to think. So if we start seeing the Fed paying attention to immigration numbers, we may see the Fed cut rates sooner than expected. Yeah. They barely talked about this, by the way.

They've done it like twice. So, yeah. They do a lot of talking. On the screen right now, I'm sharing it. you can see they, where the markets right now are basically pricing one cut by November and then a second cut by the end of January for that meeting at the beginning of 2025. So right now they're pricing to by the end by the end of January 2025. They've been, these markets have been very wrong over the last like a month. So I'm not really sure what this really matters, but just figured I'd throw that out there.

Hey, guys, unfortunately, I have to run, but thank you so much for having me on. Yeah, thanks for joining. Thank you, Hal. Have a good one. Cheers. One thing I'll add about the macro stuff, particularly PC and the labor market. One is that we're starting to see actually disinflation in the pipeline. So I actually still think that prices are going to be coming down.

And we're being told this by some of the largest retailers out there. So Walmart, Target, Amazon's Wallgreens, they're all like stepping up price discounts for the budget conscious consumer. That's disinflation. You're seeing McDonald's, Jack in the Box, Wendy's, Taco Bell, they're discounting meals, and even travel discounts, which we haven't seen in a very long time because of the revenge spending for travel post-COVID.

Those are actually starting to pop up. And it's the first time, I think, since 2020, you've actually seen this. So I think on the one hand, there's a forecasting of disinflation that's coming. And then on the other hand, we just had the ISM report come out today and it was pretty much light across the board. Manufacturing is still struggling. I think that there is like one bright spot there, which is CAPEX spending has been ticking up. This is largely driven by, I would say, deflationary things like investing in hardware as it relates to AI. So there is like one bright spot there, but consumption is likely going to moderate. The price conscious consumer,

consumers, goods are coming down in terms of price. And the manufacturing industry is actually, I think, 19 out of 20 months in a row now. It's contracting. So this is definitely important information as it relates to the economy. Now, the Fed is not, you know, design, their mandate is not the economy. It's managing inflation and employment, which is why the employment data, I think, coming this week is going to be so important because a lot of the forward-looking indicators are actually quite soft. You're seeing labor demand easing. You've got the jolt's data that's coming out. We'll see what it prints. But the trend has been that it's, it's, there are more people, there are more job openings than there are available workers. And so if we

continue to see this, I think to Alex's point about the Fed is going to need some, you know, pretty compelling data to justify cutting sooner than what the markets are pricing. We may get that. And my view has been for quite some time that it is really all about the employment data as I think the disinflationary pressures that are coming in on the consumer are well forecasted at this point. Can you define those travel discounts? What do you mean by that? Because I've been in the airport a lot lately and it's absurdly packed and I mean the travel numbers are crazy and I kind of want to take advantage of them. So two things. One, cruise ship cabins for the summer are empty. So they're trying to fill those up because they're like, wait a second, we can't be sending out boats that aren't full.

So there's slashing prices there. And then there's this app called Hoppers that is kind of like they forecast airline prices. And it's the first time since 2020 that they're seeing or forecasting airfare drops, which is pretty remarkable. And by the way, like just as an aside, crude oil is trading just. above 70 bucks right now. It's only up about 3% for the entire year. I think a month ago, there were people stammering about stagflation. It's like, well, it's really hard to have that when oil is collapsing, right? So if oil's only up 3% for the year and you're seeing consumer goods actually moving towards disinflation, I don't know. It feels like this restrictive

policy that the Fed has in place has got to change sooner or later. Yeah, we had a big drop today in WTI went from 78 on Friday and it's now at 74. I mean, I guess it's not that big, but it's still. No, it is big. Yeah. That's a big move. That's a big move. Crudeville. Oh, and by the way, I mean, I think to Alex's point, the fixed income market has been rallying, meaning yields lower. And a lot of that, even today on Monday, when we saw the ISM numbers coming out, you know, some people will assume that that is related to the contraction in manufacturing could be signaling a recession, or the economy is slowing down. But it's also been going on for a few days now.

To Alex's point earlier, the 10-year drop, I think, from 4.4% to 4.2. That's a huge move in the 10-year. And so there is clearly demand for U.S. Treasuries getting bid up here, which also has a kind of a direct correlation as it relates to the Fed's policy and what the markets are pricing. Alex, you have anything to add? Yeah, I think the key there is that it's not really getting... I mean, the question is that we're going towards, are we slowing down because we're going towards a recession or are we slowing down because just we're slowing down a little bit? And it's quite likely the latter.

Therefore, this is what some people calling markets goldilocks. You have basically growth and inflation coming down. We have rates coming down. We have the dollar that's stopped quite likely. It looks like it so far. We talked about it about what was it four weeks ago. and it's been coming down. Yeah, with the yen, right?

We talked about with the yen specifically. Yeah, exactly. Yeah, the things look good. I mean, the main concern is actually not seeing things to be concerned about. That's the way I see it. All right. I guess that's it for macro. Let's talk into some more current event type stuff.

This one just happened today as we're recording. So this is Monday, June 3rd, they were recording here. The New York Stock Exchange had some pretty big glitches today. We had Berkshire Hathaway down 99%-ish. Chipotle also got hit, Abbott. There was a few others. I'm not sure why certain ones were singled out, but there were certain names that were obviously having massive glitches.

And recently we just had some moves in the U.S. We went from usually the way stock settle, if you paid attention to the game stock saga from, what is 22 or 22, I think. There was a bunch of issues where they had to stop trading because they didn't have enough capital to do the settlement issues. This is now T plus 1. So when you buy a share, it doesn't settle into your account until the day after. This is a move.

It usually used to take two business days. So there's some speculation that it might have had something to do with that move. As far as I know, that's not confirmed yet. But I guess I'll turn it over to you guys, but what do you guys think about what's happening today and how does it relate to the more cryptocurrency? that we're used to looking at. I mean, I would buy hand over fist, the Oxford halfway down at 99%.

I'm just going to put it out there. I don't know about you guys, but it feels like there's some deep value there. I think I need confirmation. Deep effing value, as you will. A little preview. I have to cross back up. I mean, look, like as the resident technologist here,

like, it's software, so there are going to be bugs. And I think the expectation is that the nice he's been around for so long and even the NASDAQ and these other exchanges that these types of things don't happen. And in fact, that the NASDAQ has had outages a handful of times over the past 20 years. This is software. I mean, this is what happens with technology,

especially with these types of a T plus 2 to T plus 1 is a pretty material change. Granted, the engineering teams likely should have and likely did test all of this kind of stuff. But this kind of, you know, raises a bigger topic as it relates to technology in general is that in some cases, you actually can't find bugs in the code until you're in like what's called a production environment where it's a live, real environment. And I feel bad for the technologists that we're at the nicety today because, oh, my God, pretty sure some heads are going to roll. But, you know, I'm not, I'm not like surprised, right? This is just the way this type of stuff happens to work. And no software is bug free. And you see this also in crypto, right?

Like obviously, Salon has had reliability challenges. Same thing. When they get crazy amounts of activity on chain, there are going to be bugs that only surface in a production level environment. So I hear this argument a lot of like, well, you can never use, you can only use this chain because it never goes down. And, you know, no one, no institutional investors is going to put money on, say, that chain because of its reliability issues. It's like, well, what do they think about the NIC and the NASDAQ?

Because they have the same issues, right? So I just don't buy that argument. But, man, it was crazy to see Berkshire down 99% today. Yeah, I saw, so I saw a tweet on like people posting images of them able to actually acquire that stuff when it was down 99-ish percent. I have a feeling that we'll get rolled back. but I guess only time will tell. Yeah, those trades don't hold 100% they don't hold. Broken trades.

Imagine thinking you just made however many hundred thousand dollars on a single trade. Yeah, imagine that. Alex, what's your thoughts on this? I think it's just a distraction, like fun. It's funny to see it happen. And every will we talk about it, but it doesn't really matter. The one that was even more fun was the Roaring Kitty, GME

comeback. I mean, that thing went up. What is it? So went up 100% overnight and now it pulled back is only up 30% on the day. It is still really impressive. So only, yeah. Which for equity is massive. I think the question there

for two to discusses, the big thing is, is what he did in any way illegal? And I tend to think absolutely not as there was no material use of private information that he was participant of. So if you don't have information that I was given to you

that is private and I was given to you by someone who actually is related to the company question, that is not insider trading. So why would be illegal? What do you guys think? I mean, I'm with you. I'm definitely not a lawyer, but posting screenshots of your P&L,

I mean, this is literally Wall Street Betts whole thing on Reddit, right? Like, this is what they were doing, whether they were up a ton or they were getting smoked, right? Is there a law that they're breaking by posting your P&L? I don't know. I don't think so. Again, I'm not a lawyer. But if you're Gabe Plotkin, you may not want this to ever happen again, right? And other folks that are, you know, kind of have a stranglehold on on Tradfi, which is so interesting because one of the things in crypto, especially, it's still still to this day, um, across these exchanges, whether they're, they're dexes or sexes. You can post your PNL for, for your trades or your, your portfolio. And it's actually like part of the cultural lore of trading

crypto. I mean, wait, wait, one sec. We should take a step back and explain it. So he basically, he, he sent this thing going crazy with a bunch of tweets and memes and things going on like that. And then what he posted over the weekend. When was this? Last night he posted it on Sunday night he posted that he had like a $250 million notional exposure via calls. I again, I don't know how. I don't know. I mean, combined with all the tweeting is illegal, I guess it depends what he's doing with it, if it's his own money only. And I don't know. It's definitely, I don't think it's as black and white as Alex and you are making it out to be. I think there's some gray area. And if I'm somebody at the SEC, what have you, I'm going to be looking into it and make sure that

seeing when these trades went through, how they went through. I mean, even E-Trade now has come out via the Wall Street Journal saying that they're thinking about, I don't know what other word to use other than D-platforming. They're thinking about taking them off E-Trade because they're worried about this being insider trading. So, yeah. By the way, that is only going to fuel the kind of populist revolt against this. I mean, it was the same thing.

back in 2021 when they were, you know, trying to do all of these things, Robin Hood and then the Citadel P. Faf and all, like, people were just irate because they were, they were feeling like they were getting shafted because they weren't, you know, institutional guys on Wall Street. And they just liked the stock, as they say, you know, I just, it's, it's just like on the one hand, he has to know, given what he went through, what is going to be considered illegal or legal at this point. And I mean, come on, right? Like, if he's got that much money invested in GameStop, I'm pretty sure he hired a pretty decent legal team, right? And I'm pretty sure that the memes that he posted, those are just memes, right? Those are just videos that he created or whatever.

They were pretty good, by the way. I just can't see. Yeah, they're very good. Professional quality videos and whatnot. Is that illegal? Man, I hope not. Just because he's this guy and he posted this thing, you know, can you can you causally connect those memes to the price of GameStop going up? I think it's obvious there's a correlation there. But to say that he posted this and therefore the price went up, man, that seems challenging.

I mean, even if he did, so sorry, James, but even if he did, that, that's perfectly legal. It's like basically like Ackman going out and saying that he's short in treasuries and treasuries and treasury is basically collapsing and race blowing up or. Hindenburg research writing those short pieces. Yeah. Exactly. Yeah. You go out. You do your piece and you go out on the media and you publish it and you move the price.

It's legal. Yeah. So this is even more fun. The other thing to note here is that this has, actually this had an impact on meme coins today on chain. And there's this interesting correlation now that like when, when he when he first started tweeting again, you saw a bunch of meme coins rip.

And on Solana, there's a bunch of meme coins that are named GameStop and Apple and Palantir and all these things, right? They're clearly not like tokenized versions of these stocks, but it doesn't matter. The GameStop, I think when he tweeted Sunday night, his his like P&L, the GME token on Solano was up like 300% or something, right? It's just fascinating because you can see what happens clearly on chain, transparently 24-7,

and then today you hear that he's at risk of getting de-platformed on, you know, the approved platform for trading stocks that are obviously registered securities and kind of regulated by the SEC. It is thoroughly entertaining, if nothing else. I think this is going to fizzle out a lot quicker than the last time, or I guess than the first time we had Meeb Stock Mania. I mean, this thing, overnight, it went to $40-ish, and now it's trading at 28 aftermarket. I think it's just, for the most part, I think people are kind of tired of this. I don't know.

That's my, do you guys feel the same way? I think this is largely kind of done, but time will tell. I mean, look, I have no idea where this is going to. go, but I will say that the summer is about to be here. Things, you know, the liquidity in markets, especially Trotify markets, it's a little thinner during the summer. And if you got a lot of young adults on the internet that want to yolo on Robin Hood, who knows?

I don't think anybody thought GameStop could trade 600 bucks like it did the first time it went. So I think a lot of people are looking at, I think some people are looking at. I think some people are looking at this going like, I don't want to miss it this time. And then on the other hand, I saw, I forget that I saw it on Bloomberg today, I forget the guy's name,

but he's a famous short seller who's come out and just put a target on his back. He said, I am short GameStop. And I'm like, I mean, they're threatening deplatforming. And if you've got all these people on Wall Street bets that are just going to start to rally behind this again,

I mean, this is just something to me feels like the asymmetry in shorting GameStop. here is just insanely stupid. Yeah, I mean, with the T plus two to T plus one move, I mean, theoretically, Grominoid won't have the same level of potential issues. They don't need as much capital, so they won't be able to stop things theoretically. All right, guys, this is fun. Thanks for joining us in this episode of Bits and Bips.

We'll be back in two weeks to discuss more about how the world of crypto and macro are colliding. Until then, we'll talk to you soon. Thank you, guys. See ya. Yeah. Chach out.