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The Wolf Den #755 - The BlackRock ETF
Wall Street is coming for our industry.
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In This Issue:
The BlackRock ETF
Bitcoin Thoughts And Analysis
Stablecoins: The Silent Revolution In Crypto Adoption
What Is Prometheum?
Binance Nigeria Never Existed
This NFT Sold For $6.2 Million
Bitcoin Boom: Tether's Massive Investment and Total Transparency, Revealed by Paolo Ardoino
The BlackRock ETF
There’s one thing on everyone’s mind - BlackRock. More specifically, everyone is talking about their filing for a Bitcoin spot ETF. Reactions to the S-1 filing were fascinating to watch. The crypto community did what it always does: the intellectuals debated the nuances of the structure, the conspiracy theorists projected doomsday scenarios and the hype bros had a spontaneous coordinated orgasm.
Let’s discuss what went down.
To begin with, the debate between whether it is an ETF or trust is largely irrelevant, as long as we comprehend how each product is structured and operates. Regardless of whether you consider the iShares Bitcoin Trust an ETF or a trust based on the terminology in its filing, what truly matters is understanding its operational nuances. In this discussion, I'll refer to the iShares Bitcoin Trust as an ETF to avoid getting bogged down in semantics.
The real crux of the matter lies in how this ETF will operate. Unlike other Bitcoin products currently available, BlackRock’s ETF operates differently. It isn't based on futures, so there are no issues of contango, a scenario where the futures price is higher than the spot price, leading to a loss over time. Furthermore, it doesn't operate like a conventional trust, where the risk of trading at a premium or a discount can be introduced.
The distinguishing feature of this ETF is its ability to purchase Bitcoin at the end of each trading day to align the fund's holdings with the trading price. This ability, which is not present in trusts, alleviates the issue of trading at a significant discount, a problem previously seen with GBTC (Grayscale Bitcoin Trust).
Conspiracy Theories and Bad Takes
Here are some bad takes I have seen so far:
BlackRock filed a Bitcoin ETF to make a political statement.
BlackRock bought Bitcoin at $15,000 to file for an ETF and offload their position.
BlackRock’s goal is to fork Bitcoin and steal your assets.
BlackRock kills the ethos of crypto.
BlackRock is bad for the industry.
If you've held onto the belief that cryptocurrency would forever remain in an ideological bubble, I regret to inform you that BlackRock is challenging that perspective. The infiltration of Wall Street into the crypto market has always been a matter of when, not if. BlackRock is not known for playing games or hatching malicious plans. While some may harbour aversion towards BlackRock, it's clear that they've identified a strategic opportunity with this filing.
The implication is straightforward: BlackRock's move will likely expedite Bitcoin adoption, offering exposure to a broader base of investors and capital that might not have otherwise engaged with this asset class. Amidst the tide of distressing news we often encounter, BlackRock's filing emerges as a welcome and optimistic development, even at the expense of crypto companies that have been working towards and ETF for all of these years (I am invested in Valkyrie).
This is where things get interesting:
BlackRock has an impressive track record when it comes to ETF approvals, with a win-loss ratio of 575 to 1, indicating a staggering success rate of 99.82%.
Additionally, should the ETF gain approval, it will be listed on the Nasdaq, thus circumventing the need for over-the-counter (OTC) trading like Grayscale’s GBTC.
An unprecedented move revealed within the S-1 filing shows that the Nasdaq will establish a surveillance-sharing agreement with an operator to deter market manipulation. This is significant as it is likely to instill a higher degree of transparency in the market, potentially appeasing the SEC. Yes, features like this exist in the other filings, but this is still key to BlackRock’s likely success.
If BlackRock secures ETF approval, it could pave the way for GBTC to also receive approval - a favorable outcome for the entire industry.
It's likely that other investment managers will take cues from BlackRock's strategy, possibly catalyzing the launch of ETFs for other cryptocurrencies, such as Ethereum.
Historically, the GLD ETF offers the closest parallel to a potential Bitcoin ETF. Launched in 2004, the GLD led to a 370% surge in gold prices over the subsequent four years. While GLD was not the sole catalyst for gold's appreciation, it certainly lent credibility to the precious metal and increased its exposure.
Finally, the 'BlackRock' brand carries unparalleled weight in the investment landscape. With a wealth of resources, extensive expertise, and a formidable track record, the influence of BlackRock cannot be overstated. Their filing lends a seal of legitimacy to the crypto industry. Now, all eyes are on the SEC for their approval.
A BlackRock approval, however, would shine a bright light on the fact that the SEC is picking winners and losers. This will be hard to explain after rejecting 22 previous ETF applications for products that are not materially different.
Another point worth noting is that BlackRock is leading the world wide charge for ESG. Filing for an ETF strikes a sizable blow to the “Bitcoin is bad for the environment” narrative.
Should the ETF get the green light, it would be increasingly challenging to maintain the narrative that Bitcoin is 'rat poison', 'evil', or 'disgusting'. An approval could unlock access for hedge funds, 401(k) plans, financial advisors, mutual funds, foreign investors, endowments, among others.
Bitcoin was always destined to revolutionize the world, and now it seems the world is beginning to take note.
Bitcoin Thoughts And Analysis
It is important to zoom out every once in a while and remind you where we are at.
At the most basic level, we have two monster ranges - one with a bottom at $28,600 and the lower one with a top at $25,212.
We are trading between them. Which range we eventually settle in will tell us a lot about the coming months. As I have said, for now we are indecisive and sideways between the key levels.
Beautiful weekly candle - a green bullish hammer through key support at $25,212. Eyes are back on the 200 MA, which is acting now as resistance rather than support.
If this week is green, it could confirm the hammer reversal and we should prices continue up.
For now, we are looking for a higher low (blue checks) and to head back up and confirm $25,212 as support.
Global stocks experienced a drop on Monday, following a slowdown in Wall Street's robust Q2 rally from the previous week. In Europe, declines were led by chemical and construction companies, while banks performed better. Sartorius AG saw a significant drop of 15% due to an unexpectedly large profit warning. In Asia, the absence of further anticipated stimulus led to a decrease in the value of Chinese tech firms.
Despite a previous rally that wiped out over a year's worth of Federal Reserve-induced losses, the future trajectory of interest rates remains uncertain. Traders are caught between the appeal of the rally and fears of market oversaturation.
The S&P 500 index still managed to record its fifth consecutive week of gains, despite a hefty $4.2 trillion options expiry last week. Even with the Federal Reserve's warning of potential further tightening, the index is now performing better than when the Fed began its campaign.
US stock and bond markets were closed for a holiday on Monday, with futures on the S&P 500 and Nasdaq 100 largely unchanged.
This week, Fed Chair Jerome Powell will deliver his semi-annual report to Congress. Other speakers will include the Federal Reserve Bank of St. Louis President James Bullard, along with his counterparts in New York and Chicago.
In China, tech companies like Alibaba Group Holding Ltd, JD.com Inc., and Baidu Inc. all saw decreases of over 3%, causing the Hang Seng Tech index to drop by as much as 2.9%. Reports from China's State Council meeting on Friday failed to provide specific details about potential economic stimuli, creating unease among investors and exacerbating concerns about the slowing economy.
Key events this week:
US Juneteenth holiday, Monday
China loan prime rates, Tuesday
US housing starts, Tuesday
Federal Reserve Bank of St. Louis President James Bullard speaks, Tuesday
New York Fed President John Williams speaks, Tuesday
Federal Reserve Chair Jerome Powell delivers semi-annual congressional testimony before the House Financial Services Committee, Wednesday
Federal Reserve Bank of Chicago President Austan Goolsbee speaks, Wednesday
Eurozone consumer confidence, Thursday
Rate decisions in UK, Switzerland, Indonesia, Norway, Mexico, Philippines, Turkey, Thursday
US Conference Board leading index, initial jobless claims, current account, existing home sales, Thursday
Federal Reserve Chair Jerome Powell delivers semi-annual testimony to Congress before the Senate Banking Committee, Thursday
Cleveland Fed’s Loretta Mester speaks, Thursday
Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
Japan CPI, Friday
UK S&P Global / CIPS UK Manufacturing PMI, Friday
US S&P Global Manufacturing PMI, Friday
Federal Reserve Bank of St. Louis President James Bullard speaks, Friday
Some of the main moves in markets:
The Stoxx Europe 600 fell 0.5% as of 10:21 a.m. London time
S&P 500 futures were little changed
Nasdaq 100 futures were little changed
Futures on the Dow Jones Industrial Average fell 0.1%
The MSCI Asia Pacific Index fell 0.6%
The MSCI Emerging Markets Index fell 0.7%
The Bloomberg Dollar Spot Index rose 0.1%
The euro was little changed at $1.0927
The Japanese yen was little changed at 141.89 per dollar
The offshore yuan fell 0.4% to 7.1577 per dollar
The British pound was little changed at $1.2811
Bitcoin fell 0.4% to $26,379.34
Ether fell 0.5% to $1,721.04
Germany’s 10-year yield advanced two basis points to 2.50%
Britain’s 10-year yield advanced four basis points to 4.45%
Brent crude fell 0.3% to $76.41 a barrel
Spot gold fell 0.1% to $1,955.79 an ounce
Stablecoins: The Silent Revolution In Crypto Adoption
While Bitcoin may have been the first cryptocurrency to gain significant attention, it's becoming increasingly clear that stablecoins might be the real "killer app" of the crypto world. The reason is simple: stablecoins are providing a lifeline for individuals in countries with unstable economies, offering a way to preserve their wealth and transact freely despite local economic turmoil. As Bitcoiners, we would all love to believe that citizens in nations with currency devaluation are rushing into Bitcoin, but the evidence is clear that they want and need dollars. Stablecoins solve this.
The demand for stablecoins in countries facing economic instability is starkly evident in Turkey. Local demand for the dollar-backed stablecoin, Tether (USDT), surged in anticipation of the recent elections and remained high as President Erdogan's victory unsettled markets. As the Turkish lira fell to historic lows, investors and ordinary people turned to Tether as a safe haven. The digital asset's popularity in Turkey is such that Tether's share of trading volumes on BTCTurk, one of the largest Turkish crypto exchanges, stands at 20%1.
However, Turkey is far from the only country where stablecoins are making an impact. In Venezuela, the national currency, the Bolivar, has depreciated by more than 100,000% from December 2014 to September 2022, leading many to adopt crypto and stablecoins as a way to preserve their wealth. In fact, 34% of all small retail transaction volume in Venezuela now consists of stablecoin trades2.
Argentina, a country with a long history of inflation, offers another compelling case. Argentina's government enforces strict capital controls that make it difficult for citizens to accumulate savings. As a result, Argentinians have turned to stablecoins as a digital alternative to storing physical dollars. More than 31% of Argentina's small retail-sized crypto transaction volume comes from the sale of stablecoins, which are pegged to the U.S. Dollar, easily accessible digitally, and have no purchase limits, allowing Argentinians to convert any amount of pesos into stablecoins2.
In all of these countries, the story is similar: high inflation, economic instability, and restrictive financial controls lead people to seek alternatives. Stablecoins, pegged to more stable assets like the US dollar, offer a way out.
However, while stablecoins provide a means to circumnavigate some of the economic restrictions and challenges in these countries, they are not a solution to the root causes of economic instability. These underlying issues, including poor financial management, economic missteps, and restrictive policies, must be addressed by the governments of these countries themselves.
Moreover, the increasing popularity of stablecoins does not come without challenges. Regulatory scrutiny is increasing worldwide, with governments expressing concerns about the potential impact of these digital assets on financial stability, consumer protection, and the control of monetary policy.
Looking ahead, the rise of stablecoins may also pave the way for the wider adoption of Central Bank Digital Currencies (CBDCs). As people become more comfortable with digital assets, they may also become more receptive to digital currencies issued by central banks, potentially opening up a new era of digital finance, but also a new era of privacy violations and control.
The adoption of stablecoins in various economies worldwide is largely driven by economic instability and high inflation rates in traditional fiat currencies. This trend has been observed in countries like Turkey, Argentina, and Venezuela, where the populace has turned to stablecoins as a means of preserving their wealth and circumventing capital controls. Stablecoins, by maintaining a peg to stable assets like the U.S. dollar, offer a level of stability that these volatile economies can't provide.
However, the regulatory landscape for stablecoins and other digital currencies remains complex and varied across different jurisdictions. While some countries have embraced these innovations, others have imposed strict regulations or even outright bans. Similarly, Central Bank Digital Currencies (CBDCs) are being explored and piloted by many countries, but we are likely still some years away from seeing widespread, global adoption.
The intersection of technology and finance in the form of stablecoins, cryptocurrencies, and potentially CBDCs presents both immense opportunities and significant challenges. As these digital assets continue to evolve, so too will the regulatory landscapes that govern them. The coming years are likely to be a defining period for the role of these digital assets in global finance.
What Is Prometheum?
What an absolutely insane story. Prometheum was fast tracked to approval, cannot actually trade any crypto assets, is staffed almost entirely by ex regulators and fake lawyers and is funded by CCP affiliates… and more.
Until recently, Prometheum was a relatively unknown name in the crypto sphere. Yet, it has surprisingly emerged as the first crypto-focused broker-dealer to register with the SEC. Adding to the oddity, this crypto startup was invited to present at Capitol Hill, where it echoed the SEC's messaging, a coincidence that raises eyebrows.
It can be perceived that Prometheum is being used as a trojan horse by regulators, purportedly disseminating misleading narratives within our industry. However, this approach appears transparent and is unlikely to succeed. The co-CEO who testified seemed to read from pre-prepared remarks, ostensibly primed by the SEC and certain Congress members. Gary Gensler is by far the biggest crook (with power) opposing crypto. It's crucial that the narrative surrounding Prometheum is critically examined and recognized for what it truly may be.
Here’s a full thread on just how insane this story is.
Binance Nigeria Never Existed
On June 9, the Nigerian SEC issued a public statement declaring the operations of Binance Nigeria Limited illegal within the country. This news triggered a whirlwind of speculative theories about Binance, especially in light of their ongoing lawsuit. However, amidst this fear, uncertainty, and doubt (FUD), Binance clarified that this entity was not affiliated with them. Subsequently, Binance issued a cease and desist order to this illegitimate entity and is cooperating with Nigerian authorities to shut down the fraudulent exchange. The lesson here is to exercise critical thinking and not believe everything you encounter. While Binance's track record may not be flawless, I hold the view that its CEO, Changpeng Zhao (CZ), has consistently acted with good intentions.
This NFT Sold For $6.2 Million
Featured above within the white box is an NFT named "The Goose", which fetched $6.2 million, marking it as the second most expensive generative artwork ever sold. This NFT was part of a seized collection from 3AC, which cumulatively raised over $10.9 million in sales.
"The Goose" has an interesting history. Su Zhu and Kyle Davies purchased the NFT in August 2021 for approximately 1,800 ETH, equivalent to around $5.8 million at the time. For the curious, that same quantity of ETH, if held onto, would be worth about $3.1 million today.
What struck me about the auction was the fact that nearly all the NFTs sold for more than their estimated values. To me, this underscores a significant shift in public perception of NFTs and affirms their enduring appeal.
The investor who acquired the NFT shared these insights about the importance of the NFT:
“On-chain long form generative art is an act of faith by the artist and the minter. Once the algorithm is committed to the blockchain, nobody knows what outputs it will produce. The Goose represents this more clearly than any generative NFT. We could have run the Ringers mint thousands of times without producing anything like it again. The Goose has had a historic journey so far through key moments in NFT history and I suspect its journey has just begun.”
In this episode of "The Wolf Of All Streets," I sit down with Paolo Ardoino, CTO of Tether, as we delve into the details of Tether's massive Bitcoin investment and its commitment to transparency. Paolo dissects several significant events such as a staggering $7 billion USDT redemption in 48 hours, discusses potential de-pegging, and analyzes how Tether assists the USD. In the midst of recent regulatory ambiguity, Ardoino sheds light on Tether's efforts to educate regulators, the role of stablecoins in the market, and the impact of the crypto market reopening in China/Hong Kong.
In this episode with Paolo Ardoino, we discussed:
$7 Billion USDT in redemptions in 48 hours
Educating the regulators
How Tether helps USD
Stablecoin regulatory clarity
China/Hong Kong reopens to crypto
Tether buys Bitcoin
The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.
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