Unchained - How Much Money Will Flow Into Bitcoin ETFs? Here’s One Projection - Ep. 562

Episode Date: October 27, 2023

In a recent report, Alex Thorn, head of research at Galaxy, predicted that inflows to spot bitcoin ETFs would rise above $14 billion in the first year following the potential approval by the Securities and Exchange Commission of multiple applications the agency is considering. Thorn called the availability of this product significant because it will give financial advisors and wealth managers accessibility to digital assets in a way that will be acceptable to clients seeking exposure to crypto. He also believes approval of a spot BTC ETF could occur this year before the holidays, and draws comparisons between bitcoin and gold as investment products.  Listen to the episode on Apple Podcasts, Spotify, Overcast, Podcast Addict, Pocket Casts, Stitcher, Castbox, Google Podcasts, Amazon Music, or on your favorite podcast platform. Show highlights: why Alex believes this is a significant moment for Bitcoin how, in Bitcoin, retail had access to this asset before institutions why Alex expects the spot Bitcoin ETF approved this year what the capital inflows Galaxy expects to be in the first years and how they arrived at those numbers  whether the addressable market will increase significantly for Bitcoin what will be the average percentage of assets adding BTC exposure why Alex compares Bitcoin to gold, and what he learned after comparing both types of assets how much the price of Bitcoin will increase after the first year of the ETF approval, according to Galaxy's report how the several spot Bitcoin ETFs will be differentiated  Thank you to our sponsors! Crypto.com Arbitrum Foundation Popcorn Network Guest Alex Thorn, head of firmwide research at Galaxy Links Previous coverage of Unchained on spot Bitcoin ETFs: Why a Spot Bitcoin ETF Will Probably Launch No Later Than January 10 Why It Looks Like BlackRock Could Win America’s First Spot Bitcoin ETF The Chopping Block: Are We Back? The 'Low IQ' Response to the Potential Spot Bitcoin ETF Unchained:  Bitcoin Soars Past $35,000 Amid Spot ETF Optimism Bitcoin ETFs Explained: What Are They & How Do They Work? CoinDesk: BlackRock Bitcoin ETF in August Got on DTCC Site That Just Belatedly Moved Markets 12 spot bitcoin ETFs in consideration by the SEC Galaxy: Sizing the Market for a Bitcoin ETF Alex’s thread drawing out highlights from the report Alex’s thread on the potential for a “gamma squeeze” CoinShares Digital Asset Funds Flow Weekly Learn more about your ad choices. Visit megaphone.fm/adchoices

I mean, this is going to be, I know it seems crazy to us, but this is going to be a lot of people's first introduction to Bitcoin, truly. Tons of financial advisors, they haven't looked at it, right? Once it's safely and cheaply available and it's right in the same menu that they do all of their other client investing, like they're, I believe they're going to have to consider it. Hi, everyone. Welcome to Unchained, your no-hype resource for all things crypto. I'm your host, Lorraine. Laura Shin. Author of The Cryptopians. I started covering crypto eight years ago and as a senior editor of Forbes was the first Main Tree Meteor Porter to cover cryptocurrency full-time.

This is the October 27th, 2023 episode of Unchained. VaultCraft by Popcorn is your no-code defy toolkit for building automated, non-custodial yield strategies. Learn more on VaultCraft.io about how you can supercharge your crypto portfolio. Arbitrum's leading layer-2 scaling solution offers you ultra-cheap and lightning-fast transactions, all with security rooted on Ethereum. Visit arbitram.io today. With the crypto.com app, you can buy, trade, and spend crypto in one place.

Download and get $25 with the code, Laura. Link in the description. Today's guest is Alex Thorne, head of firm-wide research at Galaxy. Welcome, Alex. Yeah, hey, Laura, great to be here, big fan. There's been a lot of buzz this week about an upcoming Bitcoin ETF, and there's about a dozen issuers who are lining up to do so, including your company Galaxy in conjunction with Invesco.

And another one of the positive signs is that the SEC has changed its approach when dealing with issuers. And finally, this was a big one this week. And it turned out to be a nothing burger. But people noticed that there was a ticker for a BlackRock Bitcoin ETF on the DTC website. That got the price of Bitcoin pumping. Turns out it had been there since August. But anyway, this week, Galaxy published a report, which gave projections for what inflows the market might expect to see into Bitcoin ETFs. However, before we get into all that, why did you just talk a little bit about why it is

that you think this is such a significant moment? Oh, yeah, great. It definitely is significant, I think, Laura. And I think there's a couple of reasons. So if you look at, you know, there's this famous story in Bitcoin and Crypto that retail has had access before institutions, right? And that's true. That's broadly true. And I think that's great. You know, so everyday folks, you and I, as individuals, we can go and buy, you know, Bitcoin at Coinbase or, you know, a cash app or all these places nowadays, right? But investors, whether that's institutions or retail investors who have a third party, for example, manage their assets like a financial advisor or wealth manager, they don't really have in those channels a good way to access Bitcoin exposure. So in particular, the one that really doesn't. So you can still, you know, if you go and sign an over-the-counter trading agreement at like your Fidelity account, maybe you can buy some of the over-the-counter trusts, right? But it does require an additional agreement. It's not literally right there. You have the cash settled futures, but they have role cost and they succumb to decay, which makes them actually quite poor for longer-term investing. They're not bad for short, shorter-term stuff. But if you think about like financial advisors, they're not trying to, you know, many of these advisors may, you know, oversee the portfolies of 10, 20, 50, 100.

clients at the same time, right? So they're not going to be actively made. These are much more about modeling and then maybe rebalancing or like moving, you know, changing your secular or cyclical view and then adjusting all the portfolios, right? You really can't be like day trading the Bitcoin cash settled futures ETF. And that's what we look at and primarily. When I think about why it's such an important product, a spot based Bitcoin ETF,

I think primarily about accessibility, right? And these things broadly are sometimes. called market access vehicles. And it really is, in my view, the wealth management channel that really doesn't have a way to show their clients' Bitcoin exposure in portfolios. Some of these managers, right, they're affiliated with banks or broker dealers, right? So we call them the bank BD platforms. Those are your big Wall Street banks, right?

If there's a financial advisor that the people have that are at these banks, like they are relying upon the bank or broker dealers platform decisions and approvals of investment products that can be offered to then the end clients through these financial advisors. So in some cases, they may not add a product because it's not suitable. It's due costly. It's, I don't know, risky. Who knows what? Like, some of them don't have, like, cannabis ETFs because they just, like, don't believe

in giving people access to that. It's totally fine, right? But they're beholden to what the platform decides. And none of them that I'm aware of allow, for example, the cash settled futures ETFs or the over-the-counter trust, except for in specific exceptions. Like, literally, you'd have to, like, you'd have to, like, agitate and go get an exception, right? And then maybe they'd allow it because the client wants it.

And if it's enough, like, maybe they'll do it. So that accessibility issue is very much solved with an ETF, right? Because the ETFs are incredibly brilliant and impactful financial products in general. They've overhauled how retail and advisors invest in the markets. They're great wrappers. They can access. They function effectively as if they're just a standalone security. But of course, they can be an index.

can be actively managed or passively managed. They're kind of like a mutual fund with instant liquidity instead of like daily redemptions, right? So they're really great products. And so they're everywhere. So to me, like that that's the main issue. And if you're, if you can think about it, like financial advisors also, they don't put their clients into cash settled futures derivatives based ETFs, right? Like they might put them in like a gold backed ETF because it's gold, right? or commodity covering ETF. But again, they need a relatively low fee, a safe, an accessible vehicle. Like that's what these ETFs will be.

So it basically solves a problem that exists for a pretty big addressable market. So something that's interesting is that I recently had Matt Hogan of BitWise and James Sefer of Bloomberg on the show. And they both say that they anticipate a Bitcoin ETF will arrive by January 10th, 2024. And they said that that's the latest that it could arrive. But I heard you say in an interview that you would expect that it would even arrive this year. So I was wondering why you thought that. Yeah, great, great. And to be clear, like, I mean, I'm absolutely following like James Safer and Eric Boutchunis at Bloomberg Intelligence.

I think they've been spot on. I mostly agree with their analysis. I think that probably is right. And, you know, just I'm sure they talked about this. But that's because that's ARC's final 19B4 approval denial deadline. And the thinking is like, well, I mean, if you think they're going to ultimately approve an ETF or the ETFs this cycle, well, all of the other 19B4 is primarily for everybody that refiled in June or filed for the first time in the case of BlackRock, they're all in March. So the idea is like, well, why would the SEC deny in January and then approve in March? Like, what's going to materially have changed during that two-month period?

So the thinking is, well, like they would do them all by arc's final date because that's the current first. first final deadline. But you think it would be even sooner? Yeah, I do. And I think because, for one, we're seeing plenty of momentum, like in terms of the back and forth. I mean, again, the Bloomberg reporting about how the SEC had sent these substantive comments back on the S1 filings, right?

So you have two. You have an S1 and the 19B4. The 19B4 lets the exchanges asking for permission to list it. And then the S1, like any kind of S1 when you go public is the creation of the actual ETF, which is effectively a company whose job it is to, you know, in this case, own Bitcoin and track Bitcoin. And they're handled by two different sides of the SEC. The 19B4s are reviewed by the trading and markets division and corporate finance does the S-1s.

And in all the prior cycles, they've never even offered any kind of comment onto the S-1. So the mere fact that they apparently reportedly did. And then, of course, you've seen some issuers file amendments since then to their S-1s, with pulling forward data to the present, occasionally making some interesting disclosure changes and updating how pricing will work and whatever. But again, like benign updates, right? So the combination of them coming back, then looking at the original S-1s and comparing the newer amendments and seeing, trying to glean some information about perhaps what the SEC has been communicating with them, not seeing any giant red flags or major changes, mostly seeing like dotting the eyes, crossing the T's, some operational stuff, literally in some cases adding like disclosures around the risks of our hard fork of Bitcoin. I mean, it's pretty benign stuff, right? So that gives us reason to believe we're getting closer, right?

But then also, like, there's a very clear simple process reasons, right? You have the holidays, right? So they really, like January 10th is going to be like a couple days after people come back from New Year's. Like it seems unlikely to me that they're going to like leave some work for like the last two or three days. My guess is they'd probably want to wrap this up before the holidays if I had to guess. So that's the main simple reason. And then you couple it with all the other momentum that we're seeing and, you know, back and forths and positive signs.

Okay. Yeah, that sort of makes sense. I mean, just from a very practical perspective that you're right, I could see people not wanting to leave that. All right. So now let's get to your report. Tell us first how you approach answering the question of what the future inflows in a Bitcoin ATFs could be, like what assumptions you made, et cetera. Yeah.

So, and we did make assumptions. And we think and we attempted to make them very conservative assumptions, right? So we're when the top line numbers that people are taking from this and I'll just state those briefly, which is that we think there'll be 14.5 billion in inflows year one of an ETF, ultimately going to like 38 billion in year three, so not cumulative, like 38 billion of inflows in year three. That is intended to effectively be a lower bound, because we're, and I'll tell you why. It's based on the assumptions and the total addressable market that we're capturing. But first, the TAM, right? So we're starting with this top line number, which is the wealth channel. That's why I

talked about it before. Again, we have some discussion about accessibility and why we think that's the the segment or channel that will benefit most directly from the creation of this product. Because, again, we can go buy Bitcoin right now. I could pull out my phone, beep, buy Bitcoin, right? But, you know, like, people with wealth, like, have wealth managers, and they don't like just also separately manage a different Bitcoin position out here in some app, right? Like, no, they need their advisor to have everything right there, right? So for Bitcoin to be adopted in those portfolios, even considered for adoption in those portfolios, it has to be sitting there adjacent as an option, right? And it's that channel that I described earlier that doesn't have it.

That's a $47 trillion market in the U.S. of AUM. And we broke it down. So it's $27 trillion at broker dealers, 11.9 at banks, and 9.3, what we call RAAs, registered investment advisors. These are all the advisors on these platforms are RAs, but what we mean by that are independent investment advisors. These are advisors who are not affiliated with the broker dealer or bank. but and most likely they use like fidelity, Pershing, Schwab, all of those, those brokerages have sort of white labelish platforms that make it easy for an advisor to manage multiple sub accounts and all that. So they're at those places. And that comes out to what, I guess, 48.3 trillion is what I'm looking at.

So not 47, but right around that. So that's a big possible number, right? And then we start looking at the list of broker dealers, banks, and RAs by sorted by size. So we didn't look at literally everyone. There's a lot of them, right? But like we looked at like all the big ones. And then we started handicapping how quickly we think they would add support for the ETF.

So for example, those independent are a platform like Fidelity has, right, where I worked for 12 years. So I know a little bit. I remember this platform. They're probably going to add it pretty fast. This is not a thing where Fidelity. Sure. Fidelity.

Yeah, true. Yeah, they almost certainly will. But they, those platforms do not, it's not the same level of approval. of approval. They don't care that much what the RAs invest in in the scheme of things, not nearly as much as those that are literally affiliated with the banks platform, right? Like they walk around with like, you know, I don't want to name any banks. That's why I haven't said any, but like the big banks, they all have wealth management divisions. And those financial advisors, they work at the bank, right? And the platform is run by the banks. So like they,

they take suitability questions in much more carefully. Like I said, they have to approve and decide what products can even potentially be offered by their whole advisor universe. right? So they'll be slower to adopt the banks and broker dealers than the independence, right? So what we did is we started with, you know, like a ramp up in terms of what of that AUM in each channel is going to become addressable on each year, right? So we said only 25% of the broker dealers and banks,

AUM. I mean, we're using, I don't know, we don't know the number of accounts, but we'll just use AUM as the total like sort of addressable capital market. Only 25% will actually turn on the ability to add the ETF into a portfolio on their platform in year one, right? So that now brings down the total addressable markets. We're no longer at, you know, for example, for broker dealers, we're no longer at $27 trillion. We're at $6.8 trillion of addressable capital in year one, right? And we did that for each of them. And you can see there's a graphic in the report that

shows this ramp for each of the segments, right? But we said 50% of the IRA capital will be addressable because it's at places like Fidelity and Schwab and Pershing. And honestly, not only will they have the Bitcoin ETF, they'll probably have all of them if they're all approved. Whereas even the banks and broker dealers, it's possible that, let's say they're all approved or whatever, all nine or 12 or however many they are. They probably won't add support for all of them, even if they choose to add support. So only a couple may get through, right? Because they're like, you know, that's enough.

Like what do we need to add 12? Like, so we ramp it up based on our some assumptions. And in the case of the banks and broker dealers, like we are actually applying some of our internal knowledge looking at like which banks and broker dealers on that list when I said, So we sorted by AUM, like, and sort of making a behind the scenes judgment call, which we're not sharing. As we, A, we could be wrong, but B, like, these are, you know, potential partners and friends and other people in the financial industry in general. The report's not about who is and isn't going to do it. But basically handicapping based on, like, whether we know they're in generally interested or supportive or not supportive, right?

And so, like, if we know there's a bank or broker dealer that's very not supportive publicly, for example, of Bitcoin or the Bitcoin ETF specifically, then we, like, either don't put them in ever or remove them to, like, later. in the ramp, right? We say like, okay, maybe if it's super successful, they fold and eventually do it in year three. So you can see that ramp up over time. Yeah. So what that does, though, is when we aggregate them all together based on these, and they're not all the same. Like, we think that the RAA platforms ramp faster, like I said, than the banks and broker dealers, but the addressable market, so not the, just the addressable market of capital goes from 14.4 trillion to 26.5 trillion to 38 trillion, right? Not to the ever, in our model, ever to the total 48 trillion that we think exists. So that that's the main thing that we do first.

And then just real quick, we make two more assumptions to then, obviously not all of the 14 trillion that could is going to put all of their 14 trillion in there. So there's two other questions. What portion of that capital will actually decide to allocate something and then how much will they allocate, right? And so for the first question, we called it average percentage of assets adding BTC exposure. And we just stayed with a flat 10 throughout everywhere. We're just saying, look, one in 10 decide to put in something. I think that's pretty conservative. Like, I don't know, should it be one in 20?

I don't know. Should it be, but it could be for all I know one in five. Like we just don't know. And I think one in 10 is a defensively conservative number. And then we look at, well, how much then? What is the average percentage allocation? And here we went with 1%, which we have a separate report that goes deep into portfolio Bitcoin portfolio allocation strategies.

And one is a good, solid number that historically has been both great from a volatility standpoint, low, right, but also can provide really good benefit to your portfolio. So that brings it down to 14.4, 26.5, 38, right? So, and year one, two, three. That's how we did. In billions, just to clarify. In billions of inflows. That's right. Because one percent of the 14 trillion. All right. So in a moment, we're going to dive deeper into the comparisons and projections that he made in this report. But first, a quick word from the sponsors who make the show possible. Arbitrum stands at the forefront of innovation as the premier suite of layer two scaling solutions. bringing you lightning-fast transactions at a fraction of the cost,

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Trusted sports content, seamless sports betting. Download today. 19 plus, Ontario only. If you have questions or concerns about your gambling or the gambling of someone close to you, please go to conicsonterio.ca. Back to my conversation with Alex. Something interesting in the report is that you made a comparison to goals. And I wondered what you can say about how the state of global investment markets in gold reflects on what might happen with Bitcoin.

It's, this has been a question that's been around as long as we've been in Bitcoin. I'm sure you and Laura, right? Like, what is the relationship between Bitcoin and gold? And I think it says a couple things. I mean, I think first, even aside from the investment product world, which is what I'll really talk about because that's the purpose of our inclusion of it. you know, whether Bitcoin can trade like gold in general, I think is a huge question. I think it's traded a little bit more like gold over, you know, more recently, although this has been something that's fluctuated back and forth.

I think there's obviously reasons. I know your listeners know all this. There's reasons why I think it's reasonable on a fundamental level to compare Bitcoin and gold. They're scarce. They're non-sovereign, right? They're not, they have no liability. They're bearer assets, right?

So they have those properties. And I think Bitcoin in many ways is kind of like gold. with wings. It's like got the scarcity properties, but you can actually like move it around. Whereas like imagine trying to send a billion dollars of gold. I mean, like, you're going to have to hire an army and some trucks to move that around, you know? Like, so I, I believe in the long run it will trade more like gold. I hope we see that in general. I think it's, it's got properties that make it like that. The reason we use, we compare to gold here in this report is because gold is also, well, again, they're similar in some ways, but it's also a commodity that didn't have a widely available

investment-grade market access vehicle until an ETF was created. So that alone is, I mean, there's actually not that many to pick from, like whole asset class that finally got an ETF, right? So we went with that. And I think in general, we started comparing, there's a lot of numbers here, so I really encourage people to just read this section of the report, but in general, we started looking at what types of correlations there were between fund flows and gold price. So fund flows into those ETFs after launch and what the spot gold do. So I think, think it's reasonable to consider that. I mean, again, this type of report is back of the napkin math. We try to be very clear about what assumptions and what our methodology is. So you're certainly

welcome to disagree with it. I've seen several others come out with different ways of thinking about both inflows and impact on price, right? We're just trying to, you know, demonstrate a reasonable and thoughtful methodology to use as sort of a guidepost for what could happen. And of course, I mean, part of the reason to use gold, and a lot of people bring this up, I asked James say for this as well, when he was on my podcast, Galaxy, grains, is it reasonable to use this as a corollary or a, you know, a comparison? And he didn't think that reasonable because of the argument that you can buy Bitcoin already in like a Coinbase account, but we disagree with that. I've already said why, right? So there's, again, there's a

range of opinions on this. But gold, spot gold went up 400% in the, you know, year and a half or however long, like relatively recent soon after the ETFs launches. Now, do we know if that's because of the ETF access or is it because of macroeconomic reasons? I mean, but the thing is, is like, if macro was driving gold, like, I mean, but there was no market access vehicle for it. Would it have? It's kind of chicken in the egg. It's hard to really know.

So we just did a simple correlation analysis, just to, we're just going to, you know, do we know if that's why gold went up? No, but we see that there is some meaningful price correlation. And then effectively, we, we handicap and look at comparisons in like the percentage market sizes and stuff like that to come at to an impact is what we think will be on Bitcoin's spot price. falling that same path. We think 75% based on that first year number, up 75%, just on those 14 billion flows. Yeah.

And we have a table that shows like theoretically over time, like what its price impact would be. We did this on a monthly basis and then like, you know, annualized at the end to show like what it would be. But again. Right. And based on the price at that time, that would be about a $47,000 price. But essentially, do you think that it would be the same percent increase based on the price at launch. So, like, you would redo the analysis at that time?

I think we would read. This analysis specifically starts at the price when we wrote the report. Oh, okay. Oh, so then you would still end up at 47K. Yeah, I think so. Yeah, we didn't actually put the number if that's where 75% gets us, right? But, yeah, I mean, I think it's, we just rerun the starting, like the starting point. I think we still see, I think we stand behind the percentage in flows because it's about a relationship between flows and.

current price. So whatever the current price is, we can rerun it and see where we get. But look, I mean, I think that's pretty, like, for example, if we took today at what, like we'll call it 35K, love to see it, you know, that puts us at, you know, 26,000 higher from here. So we're up into the low 60s, right, basically. And to me, that, I think that's reasonable. Like, just broadly forgetting, we defend the methodology, I think, decently in the report, right? I mean, the methodology is straightforward and it's there. So feel free to disagree with it. But if you told me, like, an ETF launched in by the year after, it was up in the, the 60s again. I mean, this wouldn't even technically put it over the prior all-time hide.

Like, to me, that's pretty reasonable to think about, right? I don't think that's crazy to think about. So, yeah, that's where we landed. I mean, this is, again, I don't want to keep disclaiming, but it's a tough question. No one really knows, right? We don't know about timing for sure either. We don't even know if they will happen. It's just a thought exercise to see what could happen. Right. Well, since I know that is, as you said, you know, more back in the napkin, there's a lot of assumptions. Let's actually talk short-term price movement because you tweeted, quote, options market makers in Bitcoin are increasingly short gamma as BTC spot price moves up. When your short gamma as spot price rises, you need to buy back spot to stay Delta neutral.

This should amplify the explicitness of any short-term upward move in the near term. So I'm not going to pretend that I am a trading type person. So just go ahead and explain what that means. Yeah. So I sent a note to our clients and counterparties on Sunday night and Bitcoin is about 29K with this information. And then I was sharing some of it also on Twitter. And what we're saying here, now, clearly, like, if spot goes up, the reason for spot broadly going up, spot Bitcoin is an ETF anticipation, right?

You can feel it. You could feel it. You could feel it last week. There was obviously the head fake with the fake news story last Monday, but like, which I think really showed a lot. I mean, a lot of people in the traditional world, more traditional world counterparties that we trade with were caught off guard by how. violent the move was on that headline. And again, this is a headline that was not true. It wasn't

the actual approval. It was like a had it been, had the underlying story been true, it still came from a crypto native, right? It wasn't like it was, you know, Bloomberg reporting it, right? So, and it's still Bitcoin jumped like, you know, 8% in like 15 seconds, right? Like 15 minutes, right? And I think that caught a lot of people off guard. So broadly, the reason for spot going up, obviously, is around this ETF anticipation. I think a lot of people are realizing it's closer. And now you start to see the market repricing the likelihood of the ETF approval. The options market dynamics are really what caused us to launch on Monday. So we're already bleeding higher, but the reason you may have, I don't know if you were

watching, I happen to be watching at the exact moment, right when we got to about 32,000, 250, then we literally teleported to 35,000, like immediately. Now, it came back down and moved, but like that move is caused by market makers and dealers who were forced to buy Bitcoin in. size. And what I was saying on Sunday was that if we saw Bitcoin bleed higher, the dynamics in the option market could cause an explosiveness like we ended up seeing. And the reason is because many people have been speculating on the Bitcoin approval, uh, ETF approval. And they bought call options, right? They own upside. Like they, they have, they, they have exposure to the upside,

right? Because they're expressing a bullish view on Bitcoin. Well, the, where are they buying that from. They're buying that from options dealers, right? So the options dealers by definition are short upside, right? And that gamma profile is telling you the amount of, of, you know, delta exposure you're going to have for every 1% move at a different price level. So the chart I shared shows that convexity. It shows the, and you can see from the chart that the part where the net aggregate dealer short gamma position is the highest, or I should say lowest, right, we express it in the chart as a negative amount, right, is at, was at 32,500, right? So like, that's exactly why, right? When we start to get that, that's effectively maximum pain for those shorts, right? And so they have to buy back

spot. And that really contributed a lot to the explosiveness of the move. Some of this dynamic is still at play in option markets, but some, there has been some, you know, some, I was a release, releasing of some pressure by the, by the move that happened and the subsequent short covering that had to happen. But that really, I mean, that's, that's why we really started to. to like Zoom was like the options dynamics. Okay. Yeah. So we might see more of that on the way to the launch of ETFs. Last quick question, you know, as we mentioned earlier, Galaxy and Invesco are applying to issue a spot Bitcoin ETF. So assuming that you are approved along with these other ETFs, how do you intend to compete in what looks like it will be a crowded landscape?

Unfortunately, I can't talk about any differentiation or stuff about Galaxy and Vesco's Invesco Galaxy's ETF product. but I will just say that for all of these ETFs, again, like when you think about, I mean, look, we don't even address like IRAs, normal retail accounts. Like I have a, I have an IRA. Like maybe I'll want to put, it'll be easy with an ETF on like a fidelity or Schwab or whatever these platforms to put Bitcoin in an IRA. So we don't even go into what the potential for like retail adoption. Like our entire report is based solely on that channel. But if you think about it, you know, all of the firms are clearly going to be, you know, producing educational. materials, like they're doing all the things they do when they launch and sell an ETF. And I think

that there's going to be a lot of attention and an effort paid by the issuers to explain. And I mean, this is going to be, I know it seems crazy to us, but this is going to be a lot of people's first introduction to Bitcoin, truly. Tons of financial advisors. They haven't looked at it, right? Once it's safely and cheaply available and it's right in the same menu that they do all of their other client investing. I believe they're going to have to consider it. Doesn't mean they do it. There could be plenty of reasons for suitability or otherwise where they choose not to allocate, but like they can't really get away now with saying, well, it's a bad product or it's not safe or it's, you know, Coinbase doesn't offer like advisor sub-account or like what, like none of

those excuses are going to work, right? So I think it's going to be exciting. All right. Well, it has been a pleasure having you on Unchained. Thanks, Laura. Don't forget. Next up is the weekly news recap. Today, presented by veteran crypto reporter and Columbia University Knight-Badgette fellow Michael Del Castillo. Stick around for this week in crypto after this short break. Join over 80 million people using crypto.com, one of the easiest places to buy, trade, and spend over 250 cryptocurrencies. Spend your crypto anywhere using the crypto.com visa card. Get up to 5% cash back instantly. Plus 100% rebates for your Netflix, and Spotify subscriptions and zero annual fees. Download the crypto.com app now and get $25 with the code

Laura. Link in the description. Hello and welcome to this week's Crypto Roundup. We've got a packed agenda from a Wall Street Journal report that's causing political uproar to Bitcoin's price soaring on ETF hopes. Plus, we delve into securities concerns in the Lightning Network, FTX's potential restart, and much more. I'm Michael Del Castillo, a nightfaget fellow. at Columbia University, and this is your weekly crypto recap. All may not be what it appears in a recent Wall Street Journal report. An October 10 article claimed that Palestinian militant groups had raised a total of $130 million of cryptocurrency head of its attacks in Israel, sparking an immediate political reaction. Democratic Senator Elizabeth Warren, Republican Senator Roger Marshall,

and over 100 other U.S. lawmakers cited the report in the letter to Undersecretary for terrorism and financial intelligence, Brian Nelson, and National Security Advisor Jake Sullivan. The lawmakers called for the administration to, quote, provide additional details on its plan to prevent the use of crypto for the financing of terrorism, end quote. What they failed to mention, though, according to one of the journal's own sources, London-based Elliptic, is that one of the militant groups agreed with the senators. In April, news outlets the New Arab and the Times of Israel published reports citing a statement

from Hamas asking people to stop sending them crypto. Both articles cited a Hamas statement I've so far been unable to track down in its original, which reportedly gives the reason for Hamas' request to stop giving them cryptocurrency as, quote, the intensification of prosecution and the redoubling of hostile efforts against anyone who tried to support the resistance through this currency. End quote. As most of our listeners will know, investigative technology recently has proven and incredibly adept at tracking down the origin of even well-laundered assets.

Apparently, donors are already complying with the Hamas request. According to Elyptic, only $21,000 worth of fresh crypto donations have been made to Amos since the attacks. That compares to $185,000 worth of crypto, Elliptic says has been received by a group called Crypto Aid for Israel, which begs the question, what are the U.S. senators really hoping to accomplish? On this week's episode of the chopping block, Compound Labs founder Robert Leshner said, quote, Crypto is not great at illegal finance. Amos recognizes it too, end quote.

As of the time of this recording, neither the Wall Street Journal nor Senators Warren and Marshall had responded to the claims. Nevertheless, a number of efforts are already underway to capitalize on this moment. The Financial Crimes Enforcement Network, otherwise known as FinCEN, a bureau within the U.S. Department of Treasury, issued a warning about virtual currencies being used to finance terrorist organizations like Moss. In a separate move, the Department of Treasury also proposed new rules targeting cryptocurrency mixers as potential money laundering tools, linking these regulatory efforts directly to concerns about Amos' use of cryptocurrency. Adding yet another layer of complexity to the story, another group of U.S. lawmakers, are turning their attention to major crypto platforms.

Republican Senator Cynthia Loomis and Republican Representative French Hill formally requested that the Department of Justice investigate Binance and Tethers' potential role in supporting terrorism. In a strongly worded letter to the DOJ, the lawmakers requested a careful evaluation of whether these platforms are, quote, providing material support and resources to support terrorism through violations of applicable sanctions laws

and the Bank Secrecy Act, end quote. The lawmakers are specifically calling for quick action to, quote, choke off sources of funding to terrorists targeting Israel. They have asked Attorney General Merritt Garland to reach a charging decision on Binance that reflects the level of their alleged culpability and to expedite investigations

into tether's alleged illicit activities. On a more upbeat note, Bitcoin's price this week surged nearly 18% to a high of $35,150, fueled in part by renewed optimism over the potential approval of spot Bitcoin ETFs. The U.S. Court of Appeals for the D.C. circuit this week filed paperwork asserting that the SEC must reevaluate Grayscale's bid to convert its GBT fund into a Spot Bitcoin ETF. SEC Chair Gary Gensler said that the agency is actively reviewing multiple filings for Spot Bitcoin

ETFs. Though Gensler didn't specifically mention Grayscale, the Bitcoin Trust has gained a whopping 220% this year, according to a CoinDesk report, even outperforming chipmaker darling Nvidia. On this Tuesday's episode of Unchained, Bloomberg analyst James Seifart said he expected an ETF could be approved by January 10 next year. That's less than three months away. Somewhat surprisingly, though, that didn't keep Ark Invest from offloading approximately $4.3 million dollars worth of GBTC shares and $5 million worth of Coinbase. The market also witnessed over $147 million in liquidations due to Bitcoin's volatility, according to Coinglass data. Despite these developments, the crypto community remains bland, with 84% of the $66 million

in weekly institutional inflows directed to Bitcoin-linked funds, according to Coin shares. Antoine Riard, a key developer for Bitcoin's Lightning, network announced his departure from the project, citing what would be a major vulnerability, if proven true. The developer claimed that the network is susceptible to, quote, replacement cycling attacks, end quote, which could allow malicious actors to divert funds. In a post on the Linux Foundation's message board reaard wrote that, quote, only a sustainable fix can happen at the base layer, end quote, suggesting that changes to Bitcoin's foundational layer might be what's necessary for a long-term solution. After some chicken little skies following responses on social media,

Riard claimed that security flaws were not, quote, intentional backdoors, end quote. He emphasized that by identifying these alleged vulnerabilities, he did not mean to cast doubt on the competence of the Bitcoin and Lightning Development Community. He wrote, quote, lightning experts have already deployed mitigations, end quote. Almost a year after filing for bankruptcy, Crypto Exchange FTX is reportedly in advance talks with three different bidders for a potential restart. Kevin Kostfee of Pernella Weinberg Partners, the firm overseeing the bankruptcy proceedings, said, quote, we are engaging with multiple parties every day, end quote. The options on the table include selling the entire exchange or partnering with another entity

to reboot the platform, a decision, he says, is expected by mid-December. Lawyers for FTCS's non-Earchs's non-eastern. US creditors have proposed a deal offering 90% of remaining assets to investors, with conditions for those who withdrew funds before bankruptcy. Over-the-counter trades value FTCS creditor claims at 52 cents, up from 20 cents in February, indicating market optimism for asset recovery. The recovery list, considered a valuable asset, has been a point of contention. Judge John Dorsey approved an order to redact customer information for the next. next 90 days, saying, quote, a platform without customers is nothing, so it has to have value.

On Wednesday, wallets tied to FCX and Alameda transferred $10 million worth of ETH, Maker, Ava, and Link to exchanges, including Binance and Coinbase, according to Spot On Chain. One possible explanation for the Mooh is to liquidate those assets, putting downward pressure on their price. Nearly 11 months after declaring bankruptcy, Cryptoender BlockFi has initiated the process of returning assets to its customers. The company announced on October 24 that it has officially emerged from bankruptcy, with its reorganization plan approved by all relevant stakeholders.

Quote, BlockFi is pleased to announce that its bankruptcy plan is effective, end quote, the firm said in his statement. Customers at New York-based BlockFi can now submit withdrawal requests to the company's website with a deadline set for December 31. BlockFi interest account and loan customers will receive their first wave of distribution, in the coming months, according to the plan. The amount of recoveries for customers will be contingent on what BlockFi is able to recover from other bankrupt firms, including none other than FTX. In a whirlwind turn of events, Representative Tom Emmer, a staunch crypto advocate

secured the Republican nomination briefly for U.S. House Speaker, only to withdraw it hours later. Emmer had initially guarded support from House Republicans receiving 117 votes in a closed-door meeting. The crypto community was a buzz with excitement, but the nomination faced immediate backlash from former President Donald Trump, who labeled Emmer as a global rhino, that's R-I-N-O, a derogatory term that means Republican in name only, and called for other Republicans to reject his candidacy. Matt Gates, a key Republican congressman, echoed Trump's sentiments saying, quote, it's really important that the Speaker of the House have a good relationship with the leader of our party. That's Donald Trump, end quote.

Instead, a lesser-known representative and former lawyer for the Creationist Museum, Mike Johnson, was elevated to new Speaker of the House. Coinbase has filed its latest brief against the Securities Exchange Commission, arguing that the agency's authority should be limited to securities transactions. The crypto exchange is challenging the SEC's application of the Howie test, a standard used to determine what constitutes security. Quote, not every parting of capital with a hope of gain qualifies, end quote. Coin desk stated inates court filing.

On Wednesday morning, Binance, the world's largest cryptocurrency exchange faced a temporary halt in crypto withdrawals due to a technical issue. The issue was promptly resolved, however, and normal service resumed, according to the company's official updates on social media. However, while the issue was fixed quickly, it reignited concerns in the wake of the FTX exchange collapse last year. Finance later confirmed that, quote, all crypto withdrawals are now back to functioning as usual, end quote,

thanking users for their patience. And that's all. Thanks so much for joining us today. Please do stay tuned to Unchained for unparallel coverage of the Sam Bankman freed criminal trial. Laura is in the courtroom delivering first-hand observations and in-depth analysis of this pivotal case. With daily podcasts, videos, and written updates, Unchained is your go-to source for all developments that could redefine the crypto landscape. Visit Unchained Crypto.com and never miss an update. Unchained is produced by Laura Shin with help from Kevin Fuchs, Matt Pilchard, Juan Aronovich, Megan Gavis, Shawshank, and Margaret Curia. The weekly recap was

written by Juan Aronovich and edited by myself, Michael Delgistio. Thanks so much for listening, and I look forward to chatting next week. Unchained is now a part of the CoinDesk Podcast Network. For the latest in digital assets, check out Markets Daily seven days a week with new host, Noel Atchison. Follow the CoinDesk Podcast Network for some of the best shows in crypto.