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Topics covered in this episode:
- Uniswap received a Wells notice from the SEC
- Coinbase is requesting permission to file an interlocutory appeal
- $BTC and $ETH ETFs approved in Hong Kong
- Property deeds can now be put on-chain
- Possible stablecoin legislation this year
- Bitcoin halving is projected to occur on April 20th
- Disclosed holdings of $BTC ETFs are exceptionally low
Creators & Guests
Host
What is Weekly Crypto Check-In?
Hosts Robert Swarthout and Andres Sandate cover the last week's worth of crypto news, providing insights and opinions on this quickly evolving space from a fund managers perspective.
Welcome to another episode of the weekly crypto check-in recorded on April 17, 2024. I'm your host, Robert Swartout, and I'll be doing this one solo today, so we're just gonna jump right in. The first thing up on the docket is Uniswap received a Wells notice from the SEC. It seems like you're not a cool kid unless you get a Wells notice these days from the SEC, and, unfortunately, it's just more of the same. It's the SEC likely overreaching here, and, you know, there was a lengthy, Twitter post put out by the founder of Uniswap about, you know, what they expect and this unfortunately how they weren't surprised by this.
Robert Swarthout:At the end of the day, you know, like I said, it's the same thing from the SEC. We need new leadership or actual leadership of the SEC and not this whack a mole that we seem to be receiving. And I guess upfront, I should have mentioned, Uniswap is a protocol that is used for, DeFi transactions. It is purely, decentralized and at the end of the day, it's a a platform that allows, users to use wallets and trades to happen on tokens without actually having to go through a full centralized exchange. And I see Andres was able to jump in here.
Robert Swarthout:So welcome, Andres.
Andres Sandate:Hey, Robert. Sorry I'm, late. I was having some technical issues on my end, but, yeah, good to see you. And I know there's been a lot of stuff in the news, so I'll let you continue.
Robert Swarthout:Yep. So I was just wrapping up the first thing. At the end of the day, it's, you know, more craziness than the SEC. Unfortunately, Uniswap is the current, looks to be the soon, next target with the Wells notice that they received. Yep.
Robert Swarthout:And, so continuing on the theme of the SEC and court cases, you have, the the case of Coinbase. Coinbase has requested the from the courts to be able to file an interlocutory appeal, And what this means is they're asking the court if they can appeal a early decision the judge has already made in the case or early opinion the judge has before the case is fully decided kind of outside of the normal cycle of of a, a particular case. They're appealing the idea that, the the what the SEC is claiming about an investment contract, and the SEC likes a very broad definition of this. Coinbase is gonna argue that an investment contract requires an actual contract. Like Yeah.
Robert Swarthout:Seems kinda crazy. But at the end of the day, it is a a it it I don't know. This was fought in the ripple case as well, and it wasn't great clarity on that immediately, in that case. So maybe the the, Coinbase case will kind of clear this piece up if if they're allowed to do this appeal. So it's a, you know, I'm getting tired of talking about the SEC suing somebody.
Robert Swarthout:It's it's not fun. I can't imagine what it's like to be on the the other end of these lawsuits, and it's something that, you know, Congress could fix themselves. So
Andres Sandate:Yeah. I was gonna ask you before we jump into, you know, to the ETFs in Hong Kong. When you look at the industry, a lot of the headlines that we cover from week to week, Robert, are cases that the regulators are filing against issuers or against, companies that are building, in the industry. There's there's regulation and there's legal issues in every industry, and, you know, crypto and digital assets is no different. But do you feel like because there's so much uncertainty and it's such a new space that we're just bound to have a lot more, of these headlines?
Robert Swarthout:I I think we're bound to have them just for the simple reason that the the head of the FCC seems to have some sort of an agenda. Right? You know, it's it's it's just unfortunate, because he went from being someone that felt very proactive, very forward thinking on crypto, felt knowledgeable about it, and seemed like he was for it. I mean, he was even trying to be, you know as an aside, he was trying to be a, back in the day, an adviser to Binance, which has now shut down. Like Right.
Robert Swarthout:He reached out to Binance to see if he could be an adviser. It wasn't like they reached out to him and he passed on them. They passed on him, ironically, and maybe rightfully so. Maybe a wolf in sheep's clothing there. But I don't know.
Robert Swarthout:It's just it's just it's a waste of time and resources and it, you know, it is only really happening in the US. You don't see this thing really happening elsewhere. You see actually constructive work with, not just regulators, but with lawmakers, and other jurisdictions. And, you know, like in the UK, you got MICA is a, is a framework that they passed. MICA, m I c a, that is a, acronym.
Robert Swarthout:And, you know, if we could just be half as civilized, I think we'd be much better off here in the US.
Andres Sandate:Yeah. Okay.
Robert Swarthout:You know, so part of working with regulators is kind of the next topic. I mean Right. Immediately, I hadn't really thought about this. You know, I was so US focused, and that's, I guess, a mistake on my part. But the the Hong Kong, announced that they're they approved their first batch of Bitcoin and Ethereum ETFs.
Robert Swarthout:This is big. I mean, there's a lot of capital over there that probably had no other option much like it was in the US prior to, Bitcoin launch the ETF launches here. So they have Bitcoin and Ethereum in this case. So start to be able to do some diversification over there. What I wasn't able to find out, which I am curious on is, is it the same issuers issuing over there, or or, promoters or whatever you wanna call them, or is it a different batch?
Robert Swarthout:My guess is it's a different batch, different market, but, or I guess could be a measure.
Andres Sandate:I saw one report that, Bloomberg's lead ETF analyst predicted that these ETFs, and I'm not sure what basis he's making this comment, didn't he didn't expect that they would amount to much in the way of assets. So we'll have to report back over the next few months to see. Once they start trading, if they gather assets or not.
Robert Swarthout:Yeah. It will be fascinating. I mean, because China China's had very tight controls around crypto. They're doing their CBDC work internally with the Digital E1, but they have waffled between crypto's okay to crypto's outlaw, then obviously they have much more tighter controls around what their citizens are allowed in or not allowed to do. I I look forward to seeing how this one plays out because I I think that if if I had to bet that the wealthy in China would be interested in something like this, because they're always trying to figure out how to get their, you know, trying to get, I guess, capital out of the country.
Robert Swarthout:And this is maybe not necessarily outside of the country, but it starts to feel like it a little bit.
Andres Sandate:I
Robert Swarthout:don't know. It'll it will be fascinating.
Andres Sandate:Yeah. The the you know, I I think, like, you you've said over the last, number of updates that we've done with respect to regulation, the Europeans and the Asian region have been far ahead of the US, and as a result, a lot more investor receptivity, and adoption to the space. And I think we both feel that we're quite early overall in this industry here in the US with respect to capital markets and, the impact that the space is gonna have on traditional finance, just just pick one sector. Mhmm. I know we're gonna talk about real estate here next, but it will be interesting to see what happens in Asia and in Hong Kong, because there's a lot of of assets and capital that go there from, China and other other parts of the world.
Andres Sandate:So
Robert Swarthout:Yeah. Absolutely. Yeah. It's, you know, I think that while it feels like this is taking forever, from our perspective, I think that the average person is going to who's not paying attention to it is gonna wake up one day and also and it's gonna be all around them, whether it's tokenization or different crypto. You know, that may be 5 years away from now, but it's gonna be a in some ways, like, it's gonna feel like a big bang moment, I think, to some people or most people, when in practicality, this is a potentially a multi decade long journey to get to that point.
Robert Swarthout:So we will see. So this next item, number 4, list, property deeds, can now be put on chain. I was I did a double take, admittedly, when I read this head this headline. Like, I've been saying this is coming for years. I didn't think that we were anywhere close to it.
Robert Swarthout:But the idea that you could put, you could mint quote unquote mint your, your deed on chain, and you can view it through the Coinbase Wallet app. There's a bit of a partnership going on there. It was so cool. I was like, man, you know, obviously, we're not about see this be widespread. There there's so many jurisdictions that if you called your local, you know, clerk of court to ask them about your on chain, deed, they're gonna be like, what language are you speaking?
Robert Swarthout:Right. Like, we have a ways to go on this one. Wrong office. Yes. Wrong office.
Robert Swarthout:Yeah. But at the end of the day, I think it's something that we, obviously, the first one has to happen for there to be the multiple ones and, you know, at least this wouldn't be appears to be the first one out of the gate. So fun fun times ahead. Yeah. It's the first of
Andres Sandate:the first of many. I remember, you know, when I first got into the space, which is more recent than you, and sort of paying attention to the headlines and investing that I would hear about the promise of blockchain and, you know, securities and, private fund interests and all these things were gonna be on the chain, and we're starting to see some of that adoption. But, yeah, real estate was always listed as one of the top use cases. And
Robert Swarthout:Right. It's slow and
Andres Sandate:I see
Robert Swarthout:a lot of friction. Right? I mean, like, it it's it's ripe for some, improvement, my opinion. You know? That's you know, the average mortgage here, it takes probably 30 days for the average person to get.
Robert Swarthout:Yeah. You know, if if it so why why why is a property deed important to be on a chain? Well, if it's on chain and it's verifiable with a signature, electronic signature, not not your hand signature, but like a transaction effectively. You can prove that you own it, then all of a sudden the whole idea of who has ownership of something and you needing to buy title insurance goes out the window. Like, attorneys are not gonna be happy about this when it takes over because that it literally is gonna kill that business, in my opinion.
Robert Swarthout:So there's cost savings there for the buyer. And and then you start looking through what part of the transaction can you, you know, put in some electronic form that can be easily manipulated or, pushed along quicker. And I wouldn't be surprised if we you know, if we fast forward 10 years or some long period of time, then a house transaction mortgage will be done in, I mean, 24 hours seems really short, but make less than a week. It just seems like we are headed towards something a
Andres Sandate:little bit more modern, which is, pretty Yeah. Yeah. I think I think you're absolutely right. The, you know, the the the settlement of a security stock security is typically t plus 3, meaning 3 days to settle. And I got a notice the other day from on my Robinhood account that I think they've moved to t plus 1.
Andres Sandate:Right. And, obviously, where the industry is moving with technology from, from this space, this industry is instant settlement and the ability to verify funds and not having to deal with, you know, did the money arrive? I I raised capital for a long time, and we always would get phone calls from nervous advisers who'd wired funds and needed to know, did the funds settle? Right. I think the also the the other thing that's really kind of interesting is when you look at the evolution of investing in the private markets, you know, the regulators created new, with the Jobs Act.
Andres Sandate:You know, a number of years ago, it was a piece of legislation that was really intended for smaller companies to access capital and not have to go through the quite difficult, complex, expensive, time consuming IPO process. And the Jobs Act did in fact have, a lot of ramifications, and one of which was the creation of the fractional investing space, which has now become quite popular where people can invest using what's called reg a and reg a plus. And instead of having to invest, let's say, a 100,000 or a $1,000,000 into a private investment, you can now invest as little as a1000 or $25100. I think with the advent of the technology and the growth of, this technology, that number will come down, and it will also dramatically increase, like you said, the ability to sort of say ownership can trade hands quickly. And I think it's just gonna be an exciting next decade in in the security and then finance industry.
Robert Swarthout:Yeah. It's, you know, I think a lot of black boxes are gonna be, opened up, or they will gonna be routed around in the new technology. Well, it's much more transparent, which is something that I appreciate. So, so but for a lot of this to happen, we need legislation. Yeah.
Andres Sandate:That's right.
Robert Swarthout:And we we we probably are, like, beating a dead a dead horse here. But, you know, I I think there's certainly different schools of thought. I I'm tired of thinking that I think that legislation's coming. I'm tired of congress, you know, letting me down there. But I was reading something this last week that there's possible, stablecoin legislation coming, and it may actually be put in a bill, potentially that is for reauthorizing the FAA, which is kinda interesting.
Robert Swarthout:I guess, in some sense, you can kinda think of it as pork in the bill, which people tend not to like at the at the national level. Right. Or there's a bill later on that's, a chance through the NDA, whatever, some kind of aid bill, which people probably tired of that as well. So, you know, I don't know. Like, Stablecoin's the first thing that needs to happen.
Robert Swarthout:There seems to be more interest in it. There's a lot of news around stablecoin. We talked about last week. Ripple launching their own, stablecoin. You have some stuff happening in Europe around stablecoins, and you have this.
Robert Swarthout:And recently, the treasury talked about it, in a press conference.
Andres Sandate:Pay doesn't PayPal have a a stable coin now?
Robert Swarthout:Pay PayPal has one. Yes. Kind of. My understanding is it's not one that you can use across multiple chains. It's more of a in house stablecoin of sorts, within your PayPal account and maybe with within Venmo, that little their little universe.
Robert Swarthout:If it goes outside into the crypto lane, I've never seen it anywhere else, so I may be wrong in that. But, you know, the true stable coin is available at least across multiple, chains in my opinion, And, you know, it's it's a if you if you can get in that business and, get some volume, it's a great business to be in, especially where interest rates are at. So get all that get those fees. I'm assuming not the fees. You get that interest and kinda get to keep it.
Robert Swarthout:So
Andres Sandate:Yeah. Well, I know that, I was sharing with you one of the interesting factoids that I heard on my trip to New York last week, and one of the meetings I had was with the, the CEO of Bitwise. Mhmm. We were talking about Stablecoins, and he shared the fact that the one of the stable coin issuers is the 16th 16th largest owner of US treasuries in the world globally. In the world and globally.
Andres Sandate:And when you step back and think about that, you know, it's obviously there's only 15 countries ahead of us, or ahead of them in terms of the, you know, the importance, so you gotta believe the Federal Reserve, and the US government pay attention. And, from all indications, the, you know, the the Fed, the US Fed, is at least looking at this as pretty favorable. So I think there's a lot of important market participants that, are hoping that we see some legislation, whether it's in 24 or 25. Right. I'm I'm, you know, expecting it's it's more 25.
Andres Sandate:This isn't an opinion show, but it just feels that way.
Robert Swarthout:Yeah. Absolutely. I think that's probably the safe bet for sure. And I just looked it up when you were explaining that there. So the one that is 16th is Tether USDT, and it's currently a 100 and $8,000,000,000 in, market cap is what is kinda ranked in crypto, but purely it's just, how much dollars are locked up in that one.
Robert Swarthout:And I don't know what percentage that 108,000,000,000 would be treasuries, but they they claim they keep, cash, treasuries, and sub Bitcoin. Bitcoin piece is a little bit odd to me because it's like a stable coin and Bitcoin prices move. So unless they're overclauterized, I'm not quite sure how that really works. Can you contrast that with, like, USDC, which is run by Circle, which is only, cash and short term treasuries and none of this, holding a Bitcoin. They're certainly in the US regulated, a little bit differently or a little more strictly than what Tether might be.
Robert Swarthout:So, yeah. So we we will see. Hopefully, you know, I would love to see it happen tomorrow and be wrong about this. I'm ready to be wrong about this one in in a in a good sense. So
Andres Sandate:I before we jump to the the next one on the having, just to to to run a little further with the Bitcoin, you mentioned Tether and Circle. Would who would be the issuer of, of a stable coin that, let's say, got support or had the involvement of the Fed in your estimation?
Robert Swarthout:Well, I I've long thought, because this starts blurring the lines about what a CBDC is and what a stablecoin is. I kind of view a CBDC as something that is state controlled, in some sense. So that would be whether that's the Fed, even though they're independent, or Yeah. The US government some fashion at the treasury. So you have that.
Robert Swarthout:And then you have the stable coins. I almost view them as more retail focused, Maybe incense, like, issued by a commercial bank to citizens or so citizen interact. I think in the US, we're gonna end up with a system like that. I know there's some political brouhaha around the whole idea of a CBDC and some people wanna outlaw, make it not even a possibility. I think that some of that is this fear fear tactics happening, but, like, if you start to view them as a 2 tiered system in the stable coins is kinda what the average system deal with.
Robert Swarthout:You know, most people don't deal with settlement themselves at the bank, so it's like why would they care if there's a CBDC beside the sites unless they start tying identities and, be able to see transactions, individual transactions, which they can't see at the commercial bank level right now.
Andres Sandate:So there's You know? Yeah. We saw when there was a a significant emphasis on deposits, and banks are still, you know, focused on gathering deposits. So what do they offer? They offer CDs.
Andres Sandate:They offer, you know, interest bearing checking and savings accounts. So it'd be interesting to see if, it got real, real commercial and competitive because we have way too many banks in this country. And, you know, I can't imagine a scenario where, like, there's so many of these, you know Right.
Robert Swarthout:I don't think we're gonna see a proliferation of, stablecoins. You know, we're about to see a third one in some sense with Ripple's launching 1. You kinda can can view the one with PayPal being there, but until it's more widespread, I wouldn't necessarily believe it. But even Ripple's case is more, focused on just being on XRP Ledger and Ethereum. They're trying to help DeFi, start having some more growth on XRP Ledger, and they're trying to, I guess, leverage the what's happening on Ethereum and kinda be that bridge between the 2.
Robert Swarthout:I don't think that you are gonna see Ripple, at least initially, use their Stablecoin for remittance because that kind of goes against their business of using XRP to do that.
Andres Sandate:Yeah.
Robert Swarthout:But some people are trying to use, stablecoins, USDC and USDT, to send money to family or friends, whatever, overseas. So, you know, it's it's a it's a good use of the technology. You know? There's still other friction along the way, so it's not like a full fully fixed system at this point.
Andres Sandate:Yeah.
Robert Swarthout:So we have a, a Bitcoin having coming up. We've kind of talked about this on and off a little bit over the last couple weeks, but it's gonna happen between now and next week's episode. It's gonna happen pretty much guaranteed on 20th at this point. And I you know, maybe maybe we should take some, bets here, Andres. What's gonna happen 7 days following?
Robert Swarthout:So on 27th, is the price of Bitcoin gonna be higher or lower than it was on 20th, I guess, prior to the having? What do you think?
Andres Sandate:I'm going higher. I I think yeah. I think it's a an unprecedented event given all the ETFs, that have been launched since the last halving. We've been through quite a bit in this industry, but I expect that price of BTC is gonna be higher.
Robert Swarthout:Yeah. I I probably am willing to go higher. I don't think it's gonna be, like, markedly higher. I think it's gonna be a lot of sideways. I think if you zoom out a month, I'm willing to go that it's gonna be certainly higher, but I don't think it's gonna be so instantaneous as some might hope.
Robert Swarthout:The last, call it 4 days of crypto, I guess, 5 days at this point, last Friday in particular was rough. You saw some huge volatility. I was actually at the master's, so I couldn't actually see any of this. I didn't get back to my phone in the evening. I'm like, wow.
Robert Swarthout:I'm missed an interesting day. With yeah. At one point, Bitcoin was down, I believe 2 a half percent in a minute, which is pretty quick. And, you know, it's it's probably maybe 12% off its, high a week ago. So
Andres Sandate:Yeah. And I've been reading more about why. And, you know, you you see everything from geopolitical tensions between Iran and Israel to the Fed and expectations about, are we gonna actually get rate cuts in 24? Yeah. Any additional insight from you?
Robert Swarthout:I you know, when it comes to having, I think it's it's more of a psychological event than anything else. It's not gonna functionally change the supply all that much. It does I
Andres Sandate:was actually I was asking about Bitcoin. Like, why we saw such volatility on Verizon and assuming some days?
Robert Swarthout:I would say I don't know. It's it's crypto shenanigans. You know, it's most people that have been around crypto long enough were like, oh, it's down. Like, didn't think much of it. It actually made the news other way other places in more traditional sense.
Robert Swarthout:But until you know, I'm kinda like, until crypto is down 20 or 25%, don't wake me up, like, type mentality. So I don't know. Maybe it's, I've seen this show too many times to be interested in a 10% drop. So
Andres Sandate:Yeah. K.
Robert Swarthout:So I don't have much commentary around it, I guess. So
Andres Sandate:Gotcha. So with respect to the having, though, you were saying before I interrupted and infected.
Robert Swarthout:So, you know, it's going from 900 to 450, Bitcoin, per day effectively, and doesn't really change the supply all that much. Most of the Bitcoin's already out there. I think there's already, like, approaching 19,000,000 of the 21,000,000 are available in circulation. What percentage are lost forever because somebody lost the wallet key or whatever? I you know, I don't really think that 450, less per day being created is gonna change all that much.
Robert Swarthout:Over the long term, we'll see, but it's a psychological event. It is part of the cycle that we're in. So
Andres Sandate:One one thing I saw last night in the news, which I wanted to which I wanted to ask you about, is I saw in one report that of the 21,000,000 Bitcoin, at this point, industry analysts believe that the ETFs that have been launched own around 20% of the Bitcoin supply. Does that sound about right to you?
Robert Swarthout:No. That seems too high. Because 20% would be, of the current float, 19, so that'd be, like, 3,600,000, 3,800,000.
Andres Sandate:Maybe that's too high.
Robert Swarthout:Way too high.
Andres Sandate:Way too high. Okay.
Robert Swarthout:I think I would probably put it. I have to go and look. My guess is it's less than 5%.
Andres Sandate:Okay. So less than 5%.
Robert Swarthout:But what I have read is they're accounting for 20, 25 percent of trading volume on a daily basis.
Andres Sandate:So, okay, maybe that's maybe that's what I read. Yeah. So but if 5% of the Bitcoin out there less than 5%, maybe it's 3% or 2% is owned by these ETFs. That means that the other 97, 98% of the Bitcoin in circulation is owned by every other type of entity, account, individual, institution outside of an ETF and just in a wallet of some kind. Correct.
Robert Swarthout:Whether it's individual or business or, North Korea. Like, it could be email. Yeah.
Andres Sandate:Right. What are the ramifications if that percentage increases significantly into, like, a registered product. And it did not significantly, like, 2 to 10%, but just Sure. 2 or 3% to 5%.
Robert Swarthout:Right. Well, it's generally, I think it's the simple supply demand. Right? I mean, like, at some point, the amount of Bitcoin that are on is on exchanges, which is continuing to trend towards, not 0, but towards the x axis pretty, precipitously. Like, at some point, that catches up to the market and the prices are gonna respond, and they have.
Robert Swarthout:I mean, obviously, since the ETF launch in January, we've seen you know, we're sitting at 61,000 today. It was in, I think in the high thirties, low forties. Launch that we've seen all the way up to 74, back down to 50 something, back up to 61 today. So it's all over the place, and I I just believe that, you know, patience always wins out in this. And it's you know, as much as people think crypto is an overnight thing, there's certainly periods of time where it feels like overnight, but, you know, if you start zooming out over the, you know, multi year long window, the the trajectory is up into the right.
Robert Swarthout:So
Andres Sandate:Yeah. Okay. Well, we've got a couple minutes and one more, headline. Disclosed holdings of BTC ETFs Yeah. Is exceptionally low.
Robert Swarthout:Yep. So we, obviously, have spent a lot of time in the last month talking about these ETFs. This was from Eric, Okonos, the guy at Bloomberg that does ETFs. Oh, yeah. And he was saying how, currently for IBIT, so the the biggest ETF out there, there's only 30 different firms reporting on a 13 f that they actually hold that right now.
Robert Swarthout:And if you contrast that with BITO, which is publicly traded, 42% of its shares are reported on the 13 f's. So so his theory is, and it seems I would probably agree with it, that most of the buying that's been happening is retail telling their brokers or they're going into their brokerage accountants buying it, and they're nibbling. It's not, major institutions doing it. He did kinda add the caveat that, they have until, I think, May 15th, to for this quarter to do all the reporting. So all the reporting's probably not in, in all fairness.
Robert Swarthout:But, you know, a a lot of Bitcoiners and their laser eyes that you see, wants you to believe that it's only institutions buying right now. While that may be the case in some percentage, I would kind of be cautious with that mindset. Just understand that it's probably individuals and which maybe means that they are a little bit more price sensitive and maybe a little bit more, you know, buy sell buy sell buy sell versus
Andres Sandate:buy and hold. So And and the 13 and the 13 f, just for clarification, is a requirement, that the SEC, the regulator of the SEC has that any, institutional investment manager effectively with over a 100,000,000 in assets that they have discretion over, have to file this, 13 f is what it's called. It's part of the legislation of the 34 act. Gotcha. They have to disclose, the, you know, the the holdings.
Andres Sandate:So it's like you said, it's very large institutional type owners.
Robert Swarthout:Right. So, you know, this we're still not even 4 months into this thing at this point, so we gotta have a ways to go. But just, you know, another anecdote to show that it's more maybe a mile wide and an inch deep type buying versus a, a a bunch of single players buying it. So, you know, will watch that one play out over time?
Andres Sandate:We certainly will. Definitely. I expect that that will likely change in in the future.
Robert Swarthout:Yep. Awesome. Well, thanks for joining us on this episode of the Weekly Crypto Check-in. If you wanna stay updated on future episodes, you can find us in any podcast player by searching Teton Crypto Capital or weekly crypto check-in. Take care.
Robert Swarthout:Good seeing you.