Unchained - Bits + Bips: Is US Politics Driving the ETH ETF Approval? - Ep. 649

Episode Date: May 21, 2024

With ETH spot ETFs now more likely than ever, Bits + Bips hosts James Seyffart, Alex Kruger, and Joe McCann delve into the reasons behind this shift, surmising that the reversal may have come from powers above the SEC—perhaps in the Biden administration. The three hosts surmise that ETH will likely reach all-time highs, discuss how this changes their election trading strategy and ponder where there is enough institutional demand for ether ETFs. They also look at whether the potential approval could sway the US elections.  Plus, they share insights into stablecoins and how they strengthen the US’s political power globally, dive into the debate on low float/high FDV coins, and also take a peek at what they think could be the potential next crypto spot ETF. Show highlights: Why the chances of an ETH ETF suddenly reversed What the "Coinbase premium" is and how Joe uses it for trading Why Alex believes that ETH is heading to all-time highs Whether there's institutional demand for spot ether ETFs The political pressure that led to this change Whether the ETH ETF will change the course of the US elections The broader macroeconomics conditions and how Alex thinks to trade the US elections How US dollar-pegged stablecoins promote USD hegemony The debate about high FDV, low float coins, and whether there is a solution Whether new crypto spot ETFs will be approved Hosts: James Seyffart, Research Analyst at Bloomberg Intelligence Alex Kruger, Founder of Asgard Joe McCann, Founder, CEO, and CIO of Asymmetric Links Ether ETF approval: Unchained: Analysts Up Odds of Spot Ether ETF to 75% as Prometheum Launches Product That Treats ETH as a Security CoinDesk: Ether ETFs Filing Process Sees Abrupt Progress, Though Approval Not Guaranteed: Sources The Block: Fidelity files amended S-1 registration statement, removing staking rewards from prospective Ethereum ETF Unchained Podcast: Why Spot Ether ETFs Are Now Likely to Be Approved on Thursday High FDV, low float coins: Unchained: Who’s to Blame for the Underperformance of Low Float, High FDV Tokens? Timestamps: (00:00) Intro (01:40) Why the chances of an ETH ETF suddenly reversed (09:13) Why Alex believes that ETH is heading to all time highs (11:22) Whether there's institutional demand for ether (16:46) The political pressure that led to this change (28:46) The broader macroeconomics conditions and how Alex thinks he’ll trade the US elections (35:51) How US dollar-pegged stablecoins promote USD hegemony and mirror the Eurodollars market (40:01) The debate about high FDV, low float coins, and whether there is a solution (49:52) Whether there are going to be new crypto spot ETFs being approved Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey all, Laura here. In case you missed it, a couple weeks ago we launched our new show, Bits and Bips, exploring how crypto and macro collide one basis point at a time. Our hosts are James Safert, Alex Kruger, and Joe McCann. And since James was at the center of everything happening around the Ethereum ETFs on Monday, today's episode is an especially exciting one, one that we decided to release a little bit early rather than waiting until Wednesday. Bits and Bips will be on Unchained every other week. Be sure to like, subscribe, and give it a rating, a review. Hope you enjoy it. Everyone I'm talking to seems like they were blindsided by this. No one was expecting this. That tells me this came from the top. This was a political decision. And I think you're right,

Alex. I think this was a decision from above, possibly above the SEC said like Biden, the Biden admin that decided like it's not worth fighting this. We might even lose in court if we tried to do this and somebody sues us. And we're losing the votes. People are going to go to Trump solely because of the stance here and it's just not worth 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 Safert, Tradfai Archmaister, Lord of Bloomberg's End, here with Alex Kruger, Kruger, protector of the realm. And Joe McCann, Lord Commander of Asymmetric and Master of Bonk. We're here to discuss the latest stories in the world of crypto and macro

news. Just remember that nothing we say here is investment advice. You can check on chain crypto for more disclosures. All right, guys, let's get into it. Right now, it's a little after 8 p.m. on Monday, May 20th. And today is the day that me and my colleague slash boss, Eric Boutunas, tweeted massively upping our odds on spot Ethereum ETFs. So we think there's a good chance that there's approval. At the very least, there's been a huge shakeup. So we went from our official odds of 25% to 75%. But even then, we were probably even lower than 25%. We just had an update our odds fully,

but we held that 25% line. We thought it was unlikely. And there was a bunch of changes today. So, I mean, I don't know if you guys, you guys want to just ask me questions and we can dive into it and go from there. I mean, yeah, like what happened and what happens next? Yeah.

So we got a couple, we are constantly talking to people, people involved in this process. there's a lot of different like basically hands in the pot here trying to get these things launched and everyone we had spoken to that was involved in the process had told us up until today that there was no shot of it happening. I mean, I was I did panel preps with with people with with a lot of these issuers for conferences coming up. I was in D.C. last week talked with people politicians, policymakers, people at these issuers, they were all like, yeah, it's definitely not happening. There's been no movement. There's no issue. They're stonewalling us. And all of a sudden

we got some texts and talked to a couple people today, and they're like, yeah, something's happening. And we start asking around to everyone we know in the space. And they're like, yeah, we don't know what's happening. The SEC's doing it about face. And basically saying they're sending comments out on these 19B4s, which are the, it's basically a request for a rule change from the exchanges in this case. In the past, it was to allow Bitcoin ETFs to trade.

Now it's Ethereum ETFs. The deadline is May 23rd. So it's this Thursday. I was like convinced that it wasn't going to happen. Like part of me was hoping it would happen. I thought it was the right thing that would happen. But all of a sudden, the SEC just went crazy and told everyone that looks like we have comments, here's the comments on your 19B4s, get us new updated amended filings by tomorrow morning at some time.

I think 10 a.m. is what they were told. So basically all these filers are in this like last minute, last ditch effort to like update filings and get ready for this May 23rd deadline that is VanX deadline. We don't know anything other than that. But the fact that the SEC all of a sudden is engaging in this two days out is very shocking, very surprising. I mean, people are like, you should have knew this was an option. I'm telling you right now, all of the issuers, none of them really thought there was an option. They thought it might be. They thought there might be illical pressures. But by the time we got to this week, everyone's like, all right, I guess they're going to go down this rabbit hole and deny for some spurious reason again,

like I talked about in an episode last week. How does this compare to what happened with the Bitcoin spot ETF? Is it similar in terms of like the last minute dash or is this totally different? This is totally different. I mean, if you think of it. about it, Eric and I went to 90% in early October before they were ultimately approved on Gen 10 of 2024. That was when the SEC's division of corporate finance started talking with these issuers about their S-1s. That had never happened before. There was never any interaction between the Department of Corporate Finance and anyone filing for Bitcoin ETF. So that's where like, all right, that's a complete change of pattern. We're upbringer odds from 70 or 75 or 80 or whatever

was and went to 90. This is a little different because the vision of trading and markets is the one who decides these 19B4. So in order to get an Ethereum ETF approved, you need both a 19B4 approval from the division of trading and markets and you need an S1 approval from the division of corporate finance. We saw back and forth with both of them over the like three months leading up to the ultimate approvals. That's why we were so confident in them getting approved.

And why we were so confident that Ethereum wasn't happening because nothing was happening. There was no interaction whatsoever. Trading of markets wasn't even interacting. So we assume they were writing up denial letters. I can pretty much guarantee you. I bet any amount of money that if we got somebody at the division of trading markets, they probably have like an outline or a summary or an actual fully written 19 before denial for these things. That's how last minute this is.

So they basically went to the issuers. We want these things changed. We don't know what those are. I'm assuming one of them is anyone who had staking in their 19 before. I'm going to guess the SEC isn't going to allow that. I don't know what other updates they're going to request. But essentially, division of corporate finance hasn't done anything yet as far as we're aware. So what's going to happen here is if we're correct, and this is a true change and the SEC is going to approve these things this week, that's only the 19B4.

The S1 also needs to be approved. And Corp Finn, as far as we're aware, has not even begun having a conversation with any of these issuers. So that could take weeks to months before that gets ironed out and then we get these ETFs approved in trading. So even if we do get approval this week, it's going to be a very long time or it could be a very long time before we actually get these Ethereum ETFs. Wow. I mean, it's stunning. I think everyone pretty much assumed this was not going to happen. And even the prediction markets were very consistent with, I think, your unofficial call around like the 10, 11 percent. And out of nowhere, everything changed. I mean, today, I'm on the West Coast. I was managing my hedge fund portfolio, was kind of looking at things. I was like, oh, things are moving. That's cool, you know, little continuation from last week. That's good. And then out of nowhere, everything just exploded, including Ethereum. I was like, what just happened? I saw the tweet from Eric and was like, wait a second, 25 to 75?

I mean, that's huge. And it was reflected in the price. I mean, the moves were insane. There's a thing that I tend to track pretty actively, which is what's called the Coinbase Premium. And what the Coinbase Premium is, is what's the current spot price on Coinbase relative to, say, you know, the tether price on something like Binance. And the reason I track this is because most U.S. institutions, if not all of them that want

to stay a U.S. institution trade crypto, they don't trade on finance, right? And so in some cases, you will see a coin base premium pop up because there's, you'll see a coin base premium pop up because there's demand driving price. Today was the widest Ethereum coin-based premium I've ever seen, and I've been trading crypto for a long time. I'm sure there's probably some scenario in the past, but for how Ethereum has been trading, it was unbelievable. And then this happened across the board. You started to look at other things like Bitcoin, like Solana, a lot of other majors started to see huge discrepancies between the price that was trading on Coinbase relative to finance. you started to go back to Binance and all of a sudden it was trading out of premium.

It was definitely a wild market. And I think to your point, James, you guys were caught off guard. The market was caught off guard. I think one of the things that I also noticed in the markets today that reacted to this was at the money, vols or implied volatility for one week. Ethereum contracts basically doubled. That is an enormous move in vol. And we've been kind of tracking this for quite some time. a lot of folks got a little complacent over the past few weeks.

They drew down in April and they sold a bunch of calls to collect some premium in like the May, June, timeframes to buy September and December. All those guys are called away now and they're going to have to chase this thing back. So look, I don't know what's going to happen over the course of the next couple of days, but the price action suggests this stuff is going much higher. You know, I want to say it's to me it's very simple here. if the ETF gets approved, which seems like it's likely now, and by the way, it's also got it wrong, which is fine. But it's kind of clear that with an ETF approved, we're going to see all-time highs on ETH very, very soon.

Because the market is not positioned for it. I mean, you were saying 25%, I would even think that the market had priced in almost like 0% probability or as close as, as it gets to no chance whatsoever. So, I mean, ETH has been one of the most hated coins, if not the most hated coin of this cycle, and it's reflected on price. So, I mean, ETHBTC is what right now? It's like 52.

So it does make sense for that to go all the way up to at least 70 in the next couple of months. These things happen usually rather fast. Yeah. Yeah, I agree. I would say real quick, like when Eric and I, the more confirmation we got, we got like, oh, another person confirmed, another person confirmed, these are all independent people. And we're like, okay, we have to, we need to say something. And we were looking at the prices.

If you, even if you look before our tweet, markets were moving pretty heavily. The discount ETH was dropping. Like this stuff was out there before we fully broke it to everyone. But you could see that markets were kind of moving on something happening. particularly with Bitcoin and ETH and particularly with ETH. So I thought that was interesting. But I mean, the volatility and the aggressiveness of the move that we saw, like I, we were very cautious of how we said this.

We were, we went to 75% because this is not a done deal. There's a lot of things that still need to happen. And even if it does happen, like I said before, it could take a while. But Eric and I were on the phone talking about exactly how we were going to word this because we wanted to make sure we were in line with each other. But even still, we knew it was going to impact things. we didn't think it would be as impactful as it actually was, but here we are. I mean, we talked about it on the last pod, the demand or lack thereof or lack of kind of

institutional interest. Do you think that this approval, assuming it happens, do you think that that would change anything with respect to the institutional demand? I mean, it's kind of hard to say because we just got this news today. But, you know, maybe there's maybe there's a change of heart by the institutions because all of a sudden there's this opportunity for them to buy something that isn't just Bitcoin. Yeah, I mean, so if you look at like the market caps between the two of them, ETH is what, 30, 30% roughly right now of Bitcoin, somewhere around there, upper 20s, low 30s. I think that's probably a good ballpark estimate for the demand that we'll see.

So if you look at the assets and flows into the Bitcoin ETFs, maybe it'll be, I think it'll be less than whatever the actual ratio is. I don't think it's going to be meaningfully less. Eric, my boss thinks it will be meaning less. He's thinking 10, 15 percent. I think 20 to 20, 20-ish percent of what the Bitcoin ETFs did. So I don't think it's going to be, I don't think they're going to surpass Bitcoin ETFs, but I do think there's going to be demand here. And I wonder how much demand will come from people like, I already have the Bitcoin ETF. I might as will diversify and sell some Bitcoin and get ETH, that could happen. Who knows what's actually going to happen?

But there will be demand out there and people will want access to this thing. Hong Kong is a good example. The demand, again, is less than the ratio of the market caps between the two assets, but there is some demand there. Yeah, what do you think, Alex? I think there's a lot of demand out there. It's a very sexy narrative that Eith has. I mean, at the same time, something have to say is like,

we usually tend to attach a narrative to the price. So now price is moving. So we're going to look and focus on the good narratives and the good things just because that's how our brains are wired. You know, so we're going to be focusing on if is green, if is, is basically green. The green narrative for a very large fraction of people in the market is very important. What else can I say here? I mean, it's, again, I'm going back to the point.

Yeah, I think it's just a hated trade. Sorry to interrupt Alex, but I think it's just the hated trade. I mean, I've absolutely poked fun at it, right? Because the ETH Maxis certainly have stepped on the throat of my favorite L1, Solana. But as a trader, you know at some point the most hated trade becomes, you know, the most loved trade. and that was clear today in the price action. If you look at any of the pairs, too, I mean, it was perfect, right? You had sole eth basically right near all-time highs again, effectively resistance.

ETHBTC just continued to bleed to new lows. Everybody has been trying to call the bottom on ETHBTC and just hasn't happened yet. We saw a huge move in ETHBTC when the Bitcoin ETH got approved. It ripped for, I think, three days and a redactedC, and it ripped for, I think, three days in a row outperforming Bitcoin. Yep. But I think the other thing to note, and I'd love to kind of get your take on this, Alex,

is the sentiment, right? So, you know, there's another well-known podcast, very much aligned with Ethereum, where they were just kind of like, why is this happening? You know, why is Ethereum not going to be the thing that catches up? And, you know, folks really getting pretty clandestine about their, They're bags, right, more or less.

And you saw that sentiment, and I know Alex, as a trader as well, like, this is why I want to get your, your pulse on it. Sentiment's super, super important. And, like, sentiment for the, the ETH community at large was pretty low over the past, you know, I'd say week, two weeks, because it hasn't really participated in a way that some of these other, other majors have, particularly Bitcoin and Salana. So, like, sentiment check, Alex. What do you think?

Yeah. You think it was just the timing was perfect on this? No, I think it was. It needed a trigger without this trigger. I mean, the thing is sentiment had been the worst for a long time. It just kept on getting worse and worse and worse. But we've been at basically a feeling of bottom sentiment since January. That's a long time.

It's like over five months of feeling like this. So like people who are very heavy in ETH and or solely ETH, getting absolutely despondent. But without this trigger, the market needed a trigger. We got it. I thought the trigger would come basically later in the year. Full disclosure, my view was Trump, as soon as Trump starts edging, assuming he would, which is my base case, he would start edging on the elections that basically that would trigger probabilities of if getting approved the ATF to rally really, really fast.

So I wasn't thinking this would happen for quite a few months, but at the end, it's the same thing. It's just a matter of timing. It needed the trigger, right? Which I think is worth discussing. I think it's like what happened here? Like, yeah, what happened? Why now?

Why they change of heart? I think is very much tied to basically Trump suddenly going all out and expressing that he was all in for crypto. And I think that put a lot of pressure on the other side of the aisle to actually act. And we saw that, we saw a reflection of that in Congress a couple of days ago. And this is kind of like the cherry, how do you say it in English? Cherry on the top. Yes. What do you think, James?

Yeah. Yeah, I mean, I'm 100% in your camp. I mean, even our initial tweet, we said there's some political football going on here. We thought there was some political reasons here. I mean, I'll be real. I was at the Digital Chamber Blockchain Summit in D.C. last Wednesday. That was the day before the vote in the Senate that you're talking about on SAP 121. And all vast, vast majority of people in the know at these issuers or in policy circles

were fully expecting a denial here, right? They all thought, based on everything they were hearing, that we were going to get denial. People were optimistic that they would pull away some Democrats for SB 121. And then the next day, we got 12 Democrats pull away and join the Republicans in voting to repeal sob 121.

And one of them was Chuck Schumer, like Senate Majority Leader. I mean, that's, that was even shocking to me. I thought they would get a bunch of senators. I didn't think they'd get Chuck Schumer. So all the sudden, that's Thursday, and then come in on Monday morning and by late morning, well, really early afternoon, we started getting rumblings that something was happening with the SEC and these ETHs. You combine that with what you were saying with Trump hosting an FD dinner and telling everyone if you like crypto or you want to, you want crypto to stay here in the U.S. to vote for him. I mean, that and then you combine that with the fact that everyone I'm talking to seems like they were blindsided by this.

No one was expecting this. That tells me this came from the top. This was a political decision. And I think you're right, Alex. I think this was a decision from above, possibly above the SEC's head like Biden, the Biden admin that decided like it's not worth fighting this. We might even lose in court if we try to do this and somebody sues us. And we're losing the votes.

People are going to go to Trump solely because of the stance here. And it's just not worth it. So, I mean, we left. We were at 90% odds that the Bitcoin ETS were going to get approved because we heard rumblings that the Biden admin was going to step in and deny, to tell Gensler to deny these things because they didn't want it to happen. And honestly, the exact opposite thing happened here from what it sounds like. I mean, there's no way for me to confirm it. Maybe it'll come out in the coming days, weeks.

But my view is that somebody higher up in the Democratic Party, likely in the Biden admin, that decided like, look, it's not worth it. We can't deny this thing. It's not worth what's going to do the votes. And we'll see what happens if Biden actually ultimately does or does not veto the SAB 121 repeal. But time will tell. Yeah, I mean, look, this is, man, there's so many. political forces at play here, right?

Alex mentioned Trump. You mentioned SAB 121. By the way, the chair of the FDIC resigned today. And for those who are not familiar with this guy, my understanding is that he's one of the architects of choke point 2.0, which is effectively cutting. He's both.

And one point out. There you go. Yeah, there you go, right? So his resignation due to a, quote, toxic workplace, okay, we'll take it. His resignation is an interesting timing given the vote on SAB-121. And I'm not going to try to kind of go through SAB-121 and why it's important, because I'm sure Bloomberg has written all about it. But what's really compelling about that vote last week is what you alluded to.

you had you had the head of the Democratic Party, Chuck Schumer, voting in favor, as well as a number of other key Democrats and the ones in key battleground states, right? So Pennsylvania, Arizona, Nevada, and Michigan, these are real battleground states for Biden and the Democrats in general, and they all voted, you know, kind of against the veto that he said he was going to do for SAB 121. Well, it shouldn't be a surprise because the bank lobby has been very vocal about, you know, kind of upending SAB 121 because, hey, people are making money off crypto and they can't for the most part, right? If you put a liability on your balance sheet, it screws everything up. And that's the kind of the gist of how SAB 121 works.

So no bank is really going to do that. Well, if there's enough money being made and enough potential money to be made, the banks are going to state their case one way or another through through lobbying or otherwise. And to see that many Democrats effectively create a filibuster proof vote, 60, that is a huge signal to the White House. And it's likely a large political miscalculation by whomever in the administration gave him that advice to do that. Right. So, you know, Kenny maybe like save face a little bit or eat some crow and not veto it or veto it. with maybe here's some modifications and I'll accept it or something to that effect.

But with the FDIC chair resigning today with this move by the SEC to have these folks, you know, kind of modify their 19, 19B dash fours or whatever James, correct me if I'm wrong. I mean, this is, this is, it's really hard to look at this and go, hmm, you know, politics at play here. I mean, you've got to imagine that to be the case, right? Yeah, it has to be politics. We've been dancing around it. Let's be real quick and explicitly say. I'm sure there's plenty of people listen to this that don't want to hear about what

SAP 121 does. But what it basically does, as Joe is saying is, or I should say the Michael Siler or Bunk, as Joe was saying, it forces banks to keep these as if you're custody and crypto assets. Typically, if you're a bank and you custody assets, you just charge a fee for that. And that doesn't go on your balance sheet. That's not a liability in a balance sheet. You're just storing those assets for an end customer.

What SAB 121 does is says these banks, you now have to put any digital assets. on your balance sheet as a liability. And what that means for you is you have capital requirements that you have to maintain liquidity ratios, all these different capital requirements to make sure your bank is sound and safe. And all of a sudden, the cost of doing that and making sure you have enough capital offset, like what you're putting in your liability of your balance sheet makes it completely, it borderline makes it illegal for a bank to hold digital assets in a custody relationship.

There's just no way to do it. So technically, no, it's not illegal, but functionally speaking, it basically outlaws it. And that's what the House Dems and the Senate have to, sorry, not the House Dems, the House of reps in general and the Senate have voted to repeal. And now it's in front of Biden and we'll see what he does next. But if this is any indication, I think you're right. He might not actually veto it. He might spin a little bit.

I think they're worried about coming off as two anti-crypto, despite Elizabeth Warren's chanting about an anti-crypto army. I think they've kind of decided, all right, maybe we don't have to be as anti-and-aggressively anti-crypto and Bitcoin as we have been, but we need to tone it back a little bit. I'm not saying they're going to go pro-crypto all of a sudden and flip it on a script completely like Trump has, but I think they're going to try to walk back some of the language that's been said and done over the last few months. You know, on this, I think this is enough.

They don't have to do more than just get the ETF approved. Let's put it this way. There is about 40. I mean, this is a highly debatable number, but there is supposed to be about a 40 to 50 million holders, crypto holders in the US. The voting population in the US is about 160 million. So say of this, say 40 million, and of the 40 million, 30 million are voters.

And say of the 30 million, one third of those, their boat may be swayed by them being ecstatic with their basically, their P&L and just looking at their Coinbase account and saying, hell yeah. So it really, just DCTF can, I think, is it can really change the election. So, yeah, I think it's very important. And that's why I think that it came from a moment of clarity from people high up in the Biden in administration.

And I'm glad for it, of course. Well, I mean, Alex, we have a, we have a mutual friend that I think would respectfully disagree to say, like, look, guys, Chris. Crypto is just not that important to most of Americans. And I think there is something to be said about that. Like a lot of folks are single issue voters, whether it's, you know, the border, it's abortion, it's, you know, the economy, pick something. We are, you know, kind of immersed in crypto. It's 24-7 for us.

We're always on Twitter, Telegram, all these different places. We're in it. And so maybe our perspective is a little bit different. However, for me, the reason I think that it actually is becoming a bit more salient is because the Biden administration is really losing favor with the youth vote. And, you know, if you get into like the financial nihilism approach and that perspective, like, that's the youth. Those are zoomers and millennials. And those are primarily, I think out of those 40 million accounts or holders, et cetera, they're young people. And so how does Biden, irrespective of your political view of a guy, he comes off as kind of old and senile?

Even if that's not true, if it is true, it doesn't matter. Perception is reality. And if you're a young person in America today, that is your president or that's going to be your future president and he's anti-crypto? Maybe there's some credence to that. I don't know, James, like you've got, you guys have political folks clearly at Bloomberg. What's the kind of sentiment there? Is crypto just like not an issue or is it now becoming one? What do you think?

It's definitely an issue. But the general consensus from like my colleagues like is that it's my, they didn't think it was going to be a massive swaying event. I mean, the way I thought about it was like if you're if there are people in crypto, obviously kind of the what you were saying like they have to be single issue voters essentially because you were either going to vote Republican or Democrat. But if you were going to vote Democrat and vote Biden and then you solely were going to vote for Trump because of his crypto policies.

Like, I guess there's a, there are undoubtedly going to be people out there. We know some of them are very vocal, but I don't know how many of them out there are. But it's certainly a narrative. And we saw Mark Cuban and a bunch of other Mike Novagratz who's actually in the space. We've seen a lot of other people basically say that the Biden admins like handing this to Trump. I mean, if the election is going to be as close as it looks, I mean, maybe that's kind of what thing happened.

We also saw polls. We didn't even talk about this, but we saw polls in the week. Was it last week that showed that Trump was leading in like the, like, the staggering majority of the battleground states and was likely to win the election? So that could have played a role, too. They were like, all right, we need to do something to kind of swing this. So, yeah, I don't know. I think there's a lot of things that play here. Broadly speaking, Bloomberg is relatively merit, I would say neutral on crypto, but obviously I have colleagues down in D.C.

who follow the policy stuff. And they think, and he, my colleague, Nathan Dean, he's been very positive on the fact that he thinks the stable coin bill is going to get done. potentially this year. He doesn't think the more broader crypto market bills are going to get through. There's two of them out there. It doesn't sound like they're going to get through this year, potentially, but maybe next year. But that said, he's very, he's pro the stable coin bill. He thinks that's going to happen. Obviously, not with like immense certainty,

but he was over 50% last I talked to him. Yeah. Alex, like in terms of, you know, maybe later this year, right, like the election is in Q4. How are you thinking about the broader macro picture as it relates to, you know, I don't want to say trading the election, but having a view on it and what the potential outcome could be. Because I think, you know, you and I are probably in pretty fierce agreement that we see global liquidity ticking up.

We see a raging bull market ahead of us. We're kind of seeing that. The price action certainly over the past, I would say, since the bottom on May 1st. Like, how are you thinking about playing or trading the election, given the information that we kind of have today? To be honest, I need to rethink it because this is basically my election play. What's happening today is literally my election play happening ahead of time. So now I need to rethink my election play because it's not going to be as easy.

It's on the risk asset side, on the rate side, is going to be way, way, noisier. You need to still think, see who Trump is going to be, sorry, Trump or Biden, who their respective cabinets would be and like who their teams are going to be. All I know is that's going to be very volatile and that, and again, that my main election play, it's behind us. Biden is continuation. Things have been relatively good on the macro side.

I mean, aside of the criticism that he really. receives for, as you said, Joe being perceived as senile, etc. His team is doing, I think, quite a very, quite a remarkable job, or at least even if it's not them, the economy is threading along regardless. And Trump, for me, would be good for risk assets because he's obsessed with the stock market. I think he's the only person capable, like just one thing is capable of actually putting pressure on the Fed. Like, the Fed is independent until they face Trump.

Trump is, you know, is Trump. Yeah, well, you know, one other thing I do want to point out, and James, I don't know if you have a view on this or not. I haven't really thought about it, but a colleague of mine mentioned it today on our partner call. The third largest super PAC in D.C. is a crypto-focused super PAC. And they have $102 million that they've raised.

That's a non-trivial amount of money to potentially back candidates that are pro-crypto. And so maybe this is also, you know, you kind of connect all of the dots, right, follow the money. You know, you got the third largest super pack in D.C. With 100 million bucks to spend, coupled with the vote on SAB 121, coupled with Trump leading and all the battleground states. I mean, I don't know. It seems like to me it's, I don't want to say it's super close. clear, but it seems highly likely that we're getting this very, what was, I would think most people would see as a non-political issue, crypto, beyond the crypto army that doesn't exist for Elizabeth

Warren, to now becoming kind of front and center, right? Like, 102 million dollars in a super pack is a non-trivial amount of money. Yeah, I had no idea. The one thing I would say is also it's kind of like, it's almost like the logical way of doing things, right? The idea that we haven't gotten a stable coin bill, which is like, if you're, if you're worried about dollar supremacy and all these things, like, you should be in, you should be like loving stable coins. They're crypto dollars. You're basically exporting. It's another euro dollar market. You're, you're promoting dollar

hegemony. Everything is priced in dollars in the crypto market for the most part. And also, like, it's just a lot like, why can't we come with logical rules for a lot of these things? Like, why do we have, why is the SEC have to be going about things the way they are? I mean, obviously this space is ripe with massive amounts of fraud and manipulation and some really bad people. But there's people out there that are trying to do the good things. And the people that keep coming in to try to do good things, keep getting hurt. So like at my point of view, it's like not just like the politically advantageous thing. It's also like just kind of the logical way to handle things here. Like just come up with some new rules and regulations and give people

guidelines so they can they can follow them. And then we'll go from there. So yeah, I completely agree with you, but I also just think, like, this is the, it shouldn't have gotten to this point. It shouldn't have gotten as political as it has, particularly at some of the crypto stuff, I kind of get it, the market structure bills, what have you. That's, that's, that's, that's partisan. But the stable coin bill stuff, the fact that people don't want to even talk about that is like, it just boggles my mind. Yeah, welcome to Washington, D.C. Like, I mean, you know, I think you got to give a shout out to, to Circle and Coinbase and the folks at A16Z and, um, I think coin,

I mean, there's people that are fighting. Digital chamber. I'll throw that out there too. Yes. At the end of the day, like money talks and, and I think having a super pack of that size can really start to influence as it's designed to elections, right? And the candidates that they want to back. So I don't know, I'm, I think irrespective of who actually wins the presidency,

like there's still a raging bull market due for crypto. for other various macroeconomic reasons. And we've seen, you know, the employment data start to roll. We're seeing cuts be priced back into the market. You know, and there are, I mean, even deflationary things. Like, we're seeing costs of goods actually dropping. You're seeing McDonald's and Wendy's and Starbucks doing things now to kind of like try to stimulate the consumer.

So I don't know. I would look at that the election as kind of a, yeah, it's going to be a highly volatile event to trade around. but almost, it almost, I don't want to say it doesn't matter. If, for example, the ETAF gets approved and Joe Biden doesn't veto SAB, the 121 vote, I don't even think it matters his president for crypto at that point. Yeah, I actually, I might agree with you on that. I think, but again, that then he's only as four years and he does that the report back to anyone

at the end of it. So if you're a single issue voter, it still might matter to you. But I think for anyone who was reluctantly thinking about not voting for him and those two things happen, I think that. that might be enough to sway them back. But again, who knows how many people out there were planning to vote for Biden, but then because of his crypto policies had decided not to do it. Again, there's definitely some of them out there, but is that a meaningful number?

And does it matter in swing states? There's some surveys out there that suggest it might, like as you hinted at, the number of people out there. But also, I'll trust those surveys when they're not sponsored by crypto companies a little bit more. Yeah, exactly. So something we could add in here. it's interesting, I think, is on the topic of stable coins, is the analogy of basically stable coins right now and the Eurodollar market in basically 2030 or 40 years ago. Euro dollars, for those who don't know, Eurodollars are basically dollar-denominated deposits held in foreign banks used to facilitate international trade and finance outside of the U.S. jurisdiction, the U.S. banking, to basically working outside of the US banking system.

And this is a very large market nowadays. It's like $13 trillion. And it was a much larger relatively 20, 30 years ago. And the importance of this is that we could think of stable coins as sort of the euro dollars of the present and future. And this is important because basically stable coin demand is demand for US treasurer. that can actually help balance the fiscal accounts of the U.S., which are quite unsustainable at the moment. So this basically needs, stable coins need better regulation. And I think what we need to see here for stable coins to become more like Eurodollars is we need to see,

like possibly CME futures on stable coins and a derivatives market so we can actually have forward curve and people can start to start trading stable coins in a more in a more sophisticated way. Yeah, you know, you access a really great way of kind of threading the needle there because if you look at, you know, I think James mentioned this on the last pod, like if you look at Tether and their business, right, like they take in dollars and they buy treasuries and they make money off of it. If you look at circles kind of historical core business, you know, they're moving on to Web 3 services now, but same thing. They end up, you know, taking in dollars and buying

treasuries. And so these aren't massive demand for treasuries, right? These are a drop in the bucket relative to like the auctions that happen on a seemingly weekly basis. But it's still some demand. And if you actually put regulation around it, I think to your point, like maybe that demand ticks up. And it's actually net beneficial to the United States. Yeah, I'm going to shout out Nick Carter here. He's done a lot of work on stable coins. And I mean, to your point about buying treasuries, I'm pretty sure he can be attributed to the stat. I'm pretty sure he's the one that did it. But if stable coins were considered a nation state, they would be the 16th largest holder in the world of U.S. Treasury. So they're head of Norway, South Korea, obviously

behind the likes of Japan, China, the UK, you name it. But they hold an absolutely massive number of U.S. treasuries. And as you guys were hinting, as a lot of these countries, namely China, obviously Russia now. Others, they're starting to trade outside of the U.S. dollar. They're starting to not buy as much treasuries. This could be another demand bucket for this government who's looking for people to buy their treasuries going forward. So that's just another interesting way to look at this. Yeah, and shout out Nick, because he's going to be in the karate combat fight at consensus next week. So I'm rooting for you. I haven't bet on you, but I might. So I hope you win.

Will you guys, will you guys be a consensus next week? Yeah, I'm going. I'm speaking on meme coins. What a surprise. Yeah, it should be, should be fun. I'm speaking on Bitcoin ETFs and Ethereum ETFs. And the plan was to talk about the denial letter. So obviously that is drastically changing our prep call was completely worthless at this point. Will you be there, Alex? I likely be flying from, from Bali to the states on the, on the, 29th. So there's a slight chance I'll make it to consensus, but I don't think so. You better have Wi-Fi on your flight, dude, because you know what happens with crypto

conferences and price. Yeah. Yeah, it always happens. For anyone listening, if you want to, if you want to meet me or Joe, we'll both be around the conference that week. Next topic, real quick, we're going to pass over to Alex discuss the low-float high FDV coins. Can you can you get us uh get us started here Alex? Oh yeah basically it's uh it's a topic that that I think it kind of just magically ceased to be relevant overnight. Uh, now that everything is going up like crazy. It's like yeah. It's so the topic is basically a low flowed high high FDB coins. Uh, FDB meaning fully diluted valuation. And that's a very typical thing we see in uh coins that are basically that have private rounds and go to market the traditional way.

So they go out with a very low circulating supply. And the actual market cap is a small fraction of the FDB. So market cap is circulating supply times price. FDB is total supply times price. So the story, which is real is that. Eventually, all of the supply starts entering progressively into the market, and the market cannot absorb it. Therefore, these coins end up all going, excuse a hyperbole, to zero. And it's been all the rage, I mean, quite a lot of discussion about it this week because of a really good piece, Kobe, put out on the topic of low-float, high-fdb coins.

But again, that being said, I mean, this I think is a fascinating. topic and there's a lot to be done there but it doesn't really matter anymore now we're now it's about number go up to to be uh you know yeah there's there's there's been a a lot of uh no uh twitter threads and cobi's piece and um retail sentiment around low float high fdb coins and um what's interesting to me about it is it gets back to that sentiment piece where people, you know, they saw Q1 was an absolute ripper. Everything was up into the right. Air drops were ripping, you know. And then all of a sudden April happened. People got really depressed pretty quickly because

they saw their net worth, you know, get cut in half or a third or whatever, or all of it, depending on if you are a true D-Gen. But I think your point is spot on, Alex. Now that price is moving, there's a chance that there's an Ethereum ETF, you know, that will end up not even talking about this again until, you know, there's some more depression in the market. My view on it is probably non-consensus or controversial. Like, there's a couple of things that I see is an issue with the debate around this. One is it assumes there's this sort of like zero-sum game with respect to the amount of money that will be, available to support the price of these coins. That's one issue. The other issue is it assumes that on these unlocks, when these tokens become available from private investors, which yes, I am a private

investor in many of these, that all of a sudden they're going to be nuking the market and dumping on retail. And that's just not true in all cases. I think in some cases, you probably have some bad actor VCs that do that type of stuff, but also a lot of these VCs are long only. And their business model is to cream management fees for the 10 year duration of the fund. So for folks that may not know, most VC funds are 10 to 12 years in duration. So that money's locked up for a long time, which is one of the reasons why they can just stomach these huge, you know, rise and fall of price for the tokens that they end up having. If we believe that, you know, crypto, Web3, blockchain tech is going to be adopted by, you know, the masses, well, that's a, you know,

incremental money flowing into the system. If we believe that the global liquidity cycle is going to continue, that's just more money entering risk markets. And if you do believe that VCs are going to VC, well, they're going to sit on that stuff in a lot of cases, right? So I just, I understand the sentiment. I do think there is something to be said about the kind of the value of the ICO. And Anagram, friends of mine, shout out to Lily Lou and Joe Egan over at Anagram. They wrote a really interesting piece about like bring back the ICO to get you know some semblance of of more fair pricing that comes into the market there's tradeoffs to all this stuff and I don't think that you're you're going to have the the same type of outcome with the low float

high FDB coins this particular cycle as you did in 2021 there was there were clearly a lot of sketchy projects that were doing very I would say not super beneficial things to retail and the consumers that were left kind of holding the bag. I just think it's different. Do you think some of the, like, do you think there's going to be repercussions for that stuff? Like, there really hasn't been any repercussions that I've seen in some of those issues where

they got dumped on. Do you think there will be repercussions at some point? Yeah. So this is what's so fascinating about this, right? Because to me, crypto Twitter is a, is a microcosm of a community on the broader internet, right? It just happens to have a lot of money behind it and a lot of money to be made and fortunes

to be won and lost, et cetera. As an analogy, you know, if you go, if you go look at like the kind of open source software communities, there was something, I don't know, 10, 12 years ago in a project that I was involved in, a large open source project where members of my company and team were like really concerned what people were going to think if the project did X, Y, or Z. And I'm like, 99% of people don't care. They really don't care, right? And I think that that's the other thing that gets missed here is that if you're active on crypto Twitter, on telegram, you're tracking all this stuff, you're looking at charts every day, et cetera, et cetera, this stuff can rile you up

to the point where you're like, you know, screw the VCs and they're dumping on retail. We should get away through this kind of stuff. But like, go talk to somebody who just opens a Coinbase account and it's like, I don't know, this looks cool. I'm going to buy this and now multiply that times a billion people, 100 million people. You know what I'm saying? Like, I don't think they give a shit, honestly. I really don't.

What do you think, Alex? I mean, most people don't even look at tokenomics and investing schedules and who is selling at all. They may read about it on the media like 48 hours later, you know, after somebody does an analysis and a reporter picks up on it and then ends up on some journal way later. So, yeah, I fully agree with that. At the same time, on the topic of what do the holders do with the coin, it's, It's, that's the key is what, what do they do? Do they have some sort of attachment or some fundamental long-term pieces? Many of these projects, a problem they have is that they get the coin.

I think this is actually the key, is getting the coin in the hands of the right people. If you get the coin that they're in the hands of the wrong people, either through a BC round, multiple BC rounds or a fair launch, the end result is the same. It's not that a fair launch is going to be more fair because you're going to have market participants that are like very fast acting and they're going to just buy up the supply just to dump it later. So that's another thing is on these coins, on these new launches, is that if part of the criticism is that they go to market late and most of the price appreciation happens behind the scenes on private markets. but if you would change that and deploy that coin and launch it straight to the public at a very low valuation, what would likely happen is instead of the supply being beat up at very low prices by PCs, the same would happen by snipers and butters.

And the end result could very easily be exactly the same without any BCs. So, you know, it's, there's. There's no silver bullet. It's a difficult problem that needs a solution, but I don't know what the solution is right now. That's right. One other fun fact, and I'm sure James could probably fact check this on me, but I saw it in a thread by a VC that I think it might have been a C, but I don't remember who it was, but something to the effect of like the average amount of float that becomes available on, you know, a token generation

event, which is kind of the equivalent of an IPO for a token, is like 12. 13% that's actually consistent with IPOs. I didn't know that. That's actually pretty powerful to know that, hey, like this low float thing, it's like, well, that's how it's been working in markets, capital markets for quite some time, if that number is actually correct. Yeah. Yeah, the one difference is that the best in schedules on the TratFi side are longer.

That is the one thing that is different. We're talking in five to, yeah. Yeah, I think the one critical. is like they're going to these things and then the tokens are created in trading immediately, whereas like if you're doing that into an ETF from a VC perspective, typically it's years to possibly even decades before you can like actually, and I put in quotes, dump on retail by during an IPO. So I think that the criticisms are a little more, slightly more valid than that, but the vesting schedules thing is very intriguing. Do you guys have anything else for today?

Yeah, we could close it up with thoughts and what may follow ETH, assuming, assuming Ease goes well, we'll get an ETF very soon. What comes later? Would be a Dodge ETF, would be light coin, will it be Solana.

What do you guys think? Any thoughts? I mean, I was looking at G-SOL, which is the gray scale, Solana trust. You guys, yeah, I mean, I don't know, James, if you can pull this number is. Do you know, I don't know if you can pull it up,

but I think at some point today, I mean, I could be totally wrong, but I thought I looked at it. I was like, wait a second, is that 500%? It was something just insane. And I think it got there, you know, it was trading in an enormous premium earlier this year in Q1. So, you know, maybe that was true. But like, I mean, obviously I'm biased here. Yeah, what's the number?

How far off was I? No, you were right. 524% premium. And then at the end of February, it was 875% premium. So there's people still putting money into gray scale salon to trust, I guess. It's incredible. And so like, Alex, like from my perspective, obviously I'm a big Salana Bull, not a Salon of Maxi. I think Salon is probably going to be next.

Granted, there is some language in the Coinbase lawsuit that could impact that, right? But, I mean, it just seems, it seems pretty obvious. It's unlikely that, you know, if you look at like XRP, I don't, I don't know. There's some history there with the SEC. So I don't know if that's going to be the ETF that comes next. Doge, definitely not a security. Why not, right? Maybe that could be an ETF.

But from my perspective, I think at least the folks that I know in the space in Tradfi as well, there's actually some interest in Salana, mostly because people missed the ETH trade last cycle. And they see this as kind of like the faster horse. I think, you know, Raoul Paul has talked about this. A lot of other folks have talked about. Salana being that kind of next thing that could potentially happen. And, you know, Salana reacted extremely well to the price action on the news today. It was definitely Ethereum's Day to win. But from my

perspective, and yes, I'm definitely biased. I think the Salana, if there is an ETCF that comes next, it's probably something like Salon. I'll take the other side of that. I don't think Salon is coming anytime soon. I think Doge or Likecoin or possibly even earlier. I mean, the thing is, Well, first of all, we were talking about whether or not the presidency actually matters if Biden does what it seems like he might do. But the precedent here is that you have a CME futures market that is large enough and liquid enough for the SEC to surveil the spot market. So you have a regulated market. They refuse to call it of significant size, which I'll be interested to see whether or not, even if it's a denial order. I was salivating waiting to see what a potential denial order of these ETHTS because personally, I think it should happen.

I thought it should be approved. But the precedent here is you have a CME futures market that's regulated by a U.S. federal regulator, CFTC. So, like, I think right now the path is you need to do that. So outside of that, as Alex, as you hinted before, like, Doge is definitely not a security. It's likely a commodity, almost certainly. Lightcoin probably falls into that category as well, but who knows? I don't know what the SEC is going to say about Ethereum status if they do issue an approval or denial here.

And then you mentioned XRP, honestly, if that lawsuit goes all the way up and it gets done before we get any sort of clarity against what's a security or not a security, theoretically, if it goes all the way up and it's deemed to not be a security, I think XRP could be next, assuming there's like a futures market or regulated market they can surveil. But until you see a futures market on Solana that is regulated by, say, the CFTC, I think at this point there is unlikely any reason to see a Solana ETF. That said, I've been saying for well over a year now, it was Bitcoin first, Ethereum second, and then we're probably years away from another one. But again, if we have a different admin and somebody else running the SEC, maybe a Hester Perce, I don't know if she would actually get to be the chairman. But if she was running the SEC, I think she'd have a much more open-minded view of the space. Well, James, I'm just glad we finally disagreed on something.

Yeah, it's more fun when we disagree. It's this people listen to it's like all these guys planned to talk about this beforehand, but really, you didn't. Cool. I was just going to add, I think it's about the futures contract. So I would be 50-50 between Seoul and Dodge, but the question is what, I mean, it is not a black rock that is behind the listing of a futures contract at the CME is the CME itself, right? So I actually wouldn't, don't have a strong view there, but I think it's an interesting topic. Yeah, it'll be interesting. I know Coinbase filed for some futures contracts out there as well on Doge and Lightcoin and some other things.

So it'll be interested to see what happens there. But yeah, I think that's it for this one. Thanks for joining us for this episode of Bits and Bips. We'll be back in two weeks to discuss more about how the world's in crypto and macro are colliding. Till then, talk soon. Hopefully when we come back here, we can discuss the approval orders. If not, we'll definitely be discussing denial orders. And Joe and I will be at consensus.

So if you want to meet us there, we'll be there. Thanks, guys. See ya. Thank you. Bye-bye.