Erik Budde

Crypto Curious: Welcome to the Show

Published about 2 months ago • 3 min read

No “Happy New Year” for you. We’re past the statute of limitations and ain’t nobody got time for that when crypto is poppin’ off. Also, given I now have a day job, I’m going to switch up the structure of these e-mails. Instead of intricately interwoven gripping 3-act stories you’ve been getting, they will now be shorter, one-off pieces. Let’s see how it goes.

🟢 Oh My God, It’s Happening

Remember that feeling on Christmas Eve when you were *sure* Santa was going to bring you that G.I. Joe with the Kung Fu Grip, but you were terrified that Gary Gensler Santa thinks you’ll shoot your eye out and will leave you coal instead? Well, that’s pretty much how the crypto community feels like this weekend. The decade-long journey to launch a (spot) Bitcoin ETF seems to be coming to its conclusion. Virtually all analysts expect SEC approval some time between January 8-10 (probably well before many of you get around to reading this) baring some highly unexpected reversal.

After the SEC lost a handful of court cases, their position has shifted from adamant refusal to a grudging grinding of gears. The last two months have seen all sorts of exhaustive, arcane administrative negotiations: requiring cash vs. in-kind redemption, naming authorized participants (some find it hilarious that JP Morgan has been actively involved), etc. But last Friday, all 11 current applicants filed their final 19b-4 amendments and the SEC said it has "no additional feedback" (i.e. we’re reached BTC_ETF_Application_FINAL_FINAL_v23.doc).

Here’s a great summary of the applications from one of the two Bloomberg analysts that have been following this in precise detail:

Most current discussion is no longer on “if”, but rather “what will happen” once approval comes. Is this a “buy the news, sell the rumor” situation or is the price going to pop if Blackrock actually does have $2 billion lined up for Week 1? But make no mistake about the long-term significance should the SEC actually approve this ETF. This will be a major watershed moment for Bitcoin and all of crypto.

1) It becomes instantly way easier for individuals and institutions to buy and hold crypto. Now that it’s integrated into the traditional financial system in an easy, inexpensive way, people won’t have to set up a separate Coinbase account or, god forbid, get some fiddly “wallet” to hold (and potentially lose) their crypto. And although this is only a Bitcoin ETF approval for now, other crypto tokens are sure to follow. Applications have already been submitted for an Ethereum ETF (and the SEC has already approved a futures based Ethereum ETF). It may take years before we get beyond those two, but once these are launched, there will surely be others.

2) You’ve now got 11 enormous asset management firms that will be out pitching their products, spending marketing dollars and fighting for AUM. I mean, just look at the assets under management for some of these applicants:

  • Blackrock: $9.3 Trillion
  • Fidelity: $4.5 Trillion
  • Franklin Templeton: $1.53 Trillion
  • Invesco: $1.5 Trillion

We’re seeing multiple TV ads (some even featuring the world’s most interesting man) and early fights over who can have the lowest fees. But on the ground, each of these firms will start pushing these product through their networks, educating legions of advisors and deputizing them to sell through to their end customers and teach them about crypto. Which leads to the most significant change…

3) Bitcoin is now just part of the traditional financial fabric and it won’t be leaving. Elizabeth Warren has lost. The fight isn’t over, but it’s done. Blackrock and Fidelity and Jane Street and even JP Morgan and Goldman are now invested in Bitcoin’s success (or at least it not being made illegal). And you may have a different world-view than me, but my pragmatic belief is that once rich, powerful players want something, it tends to happen.

What may emerge is a different version of Bitcoin: much less the original “Tear Down the Financial System” cypherpunk vision of Bitcoin, and more of what Ben Hunt calls Bitcoin!(™), a form of Bitcoin co-opted by Wall Street, KYCed and packaged for sale. But I’ve mostly thought that was bound to happen anyway so a topic for another day. Welcome to the show, kid.

This Week's Freezing Cold Take

It’s rare that a take can turn freezing cold immediately upon being uttered, but we’ve got a new contender:

Speaking at a conference in New York, [Jamie Dimon] the boss of America’s biggest bank said he would fire “in a second” anyone at the investment bank found to be trading in bitcoin. “For two reasons: it’s against our rules, and they’re stupid. And both are dangerous… The currency isn’t going to work. You can’t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart.
- September 13, 2017

Last week, JP Morgan was named as an Authorized Participant on three Bitcoin ETF applications (i.e all they will become some of the biggest Bitcoin traders in the world).

As always, thanks for reading. Send me questions and please share with your crypto curious friends.

Erik Budde

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