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Topics covered in this episode:
- Gensler “so-called” exchanges
- Trump buys hamburgers in NYC with BTC
- Smoking gun: Silvergate was solvent
- SEC approves options for BlackRock’s BTC spot ETF
- SEC chairs in front of the Financials Services Committee
- FTX Estate starts distributions
- BNY Mellon approved for crypto custody
- October 7th, last appeal date
- CZ was released from prison, 2 days early
- Bitwise files for XRP ETF
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 October 2, 2024. I'm your host Robert Swartout. I'm joined by my co host Andres Hinnate. How's it going, Andres?
Andres Sandate:Hey, Robert. Good. It's fall here in Atlanta, though, today. It feels like it's back to summer. I'm, yeah, I'm going out to Phoenix today.
Andres Sandate:So, I guess it was a little bit of a preview of what to expect over the next 4 days in the
Robert Swarthout:in the valley. Warm up. Yeah.
Andres Sandate:It is hot.
Robert Swarthout:Well, they don't they won't have the humidity, so you'll get the heat without the humidity. Sweet.
Andres Sandate:Yeah. They say that. Right? It's the dry heat. Well, how how have you been?
Robert Swarthout:Doing pretty good. I was, out of town last week, out in Idaho. Got to enjoy some rather cool weather out there. Fall is definitely in swing out there. Aspens are changing colors.
Robert Swarthout:It's rather beautiful at this point. But back here in Atlanta, doing another episode. How you been?
Andres Sandate:Well, we, yeah, we didn't do last week. I was on fall break. I was, in Florida on the gulf, and, man, thoughts and prayers go out to all those folks affected by Helene. We, we avoided a direct hit. You know, we were on the gulf between Pensacola and Panama City, and we were we were, like, I would say, an hour and a half, you know, west of Big Bend, Florida where it kinda hit, and Mhmm.
Andres Sandate:Tampa, Saint Pete area. But it's just, yeah, you still see, like, the impact it's had on, communities, especially like Asheville, North Carolina, and others that have been hit so hard. So it's, it's good to be back, you know, but hopefully these folks can recover and get back to some sense of normalcy in the weeks ahead.
Robert Swarthout:Yeah. Yeah. We don't have to talk about the hurricane the whole time, but one thing that I learned is Asheville had the exact same thing happened to it a 108 years ago. And, like, there's a memorial in downtown Asheville, I believe, kind of moralizing that, you know, the people that lost their lives and that kind of stuff. And, like, it totally got washed over and messed up.
Robert Swarthout:I'm just kinda like, this is kinda crazy to see how it's something exactly the same thing happened twice. So Wow.
Andres Sandate:Albeit Well, a lot of news to cover as we said, back, you know, with 2 weeks. Certainly lots of action from our friends at the SEC, and an exciting development with XRP at the end, a little preview of what's to come.
Robert Swarthout:Yeah. So let's jump in here. You know, our our buddy Gensler that, you know, heads up the SEC, while he's apparently no longer gonna be saying crypto asset securities, he seems to have adopted a a something similar where he refers to crypto so called exchanges. Like, what what else are they if they're not an exchange? Like, it it's just like, he just finds ways to poke.
Robert Swarthout:I think this is his sense of humor and, maybe it'd be it's a bad sense of humor, I guess, maybe by definition. But it's, it just I'm just like, really? We had to do this? Like, we're not 12 years old. Can we grow up?
Robert Swarthout:Yeah.
Andres Sandate:Was this in a, oppressor, or was this something that that he came out and gave comments? Because I know he gave comments at a recent, Fed conference that we'll talk about here shortly.
Robert Swarthout:I don't know the exact context. I believe it was around that same time that the Fed thing that you're referring to is likely there, but I I don't know for certain.
Andres Sandate:I always wonder if these regulators and officials, you know, if if what they're reading you know, obviously, it's been reviewed by lawyers. It's been reviewed you know, thinking about, like, the Fed. You would assume. Right? Yeah.
Andres Sandate:Now are they speaking, you know, in a q and a, and they they say something that's, you know, more adlib, it's Right. It's interesting because in the times we live in, especially in crypto with the social media following and everybody tweeting, maybe that's the way it is in every industry, but certainly this stuff lives in real real time on Twitter here or x, with crypto. So
Robert Swarthout:Yeah. So,
Andres Sandate:you know So so called exchanges. Yeah. So we've got more to talk about with so called exchanges. Yes. We do.
Andres Sandate:Yes. But hamburgers are in the news. Yes. You're on buying hamburgers. Is this, like, the pizza thing?
Robert Swarthout:It may turn into a bit of a meme like that. In this case, Trump was, doing a, campaign stop in New York City, I believe, and he stopped at a famous hamburger place. I forget the name of it offhand, but he went in and bought hamburgers that they they knowingly already took Bitcoin, so he went in there. Obviously, he's playing to to the base that he's trying to attract that is the crypto voter right now.
Andres Sandate:No. This is like the famous bar in Manhattan. Like Yes. Yeah. This is like the most famous bar in Manhattan.
Andres Sandate:It's all crypto native, you know, guys and and gals. I think this is, unless he went into 2 pubs or 2 restaurants, but I Okay. I know he made an appearance and he paid in he paid in Bitcoin.
Robert Swarthout:Paid in Bitcoin. The part that I find hilarious is there's It's an $800 hamburger. Probably. Well and then maybe by the end of the year, it could be more, because the you know, Bitcoin price goes up. But the what I find really funny about this whole, situation is, you know, he has assumed some kind of staff that are helping him trying to operate his wallet on his phone, to pay in Bitcoin.
Robert Swarthout:And you have the restaurant employee there. They're trying to figure out why it's not working. It takes like a minute or 2 for this transaction to go through. It is the little video clip is just so awkward. It's like Yeah.
Robert Swarthout:There's better cryptos to be using for payments that go through instantly, and you just kinda know versus this this wait and see approach that Bitcoin has with this block block time. So it's a, you know, many many comments were like, thank god it's over, like, when people were watching the video.
Andres Sandate:Right. Right. Well, you know, he has made a lot of public appearances of late, right, given Mhmm. You know, just given the attempts on his life. Right?
Andres Sandate:We had, what, a month ago, 3 weeks ago, like, the incident in his golf course in Palm Beach, and then, you know, the so that's the second one. But he's getting out. Right? And and Yeah. You know, this is another example.
Andres Sandate:I think he was at the Georgia made an appearance at the Georgia Alabama football game Saturday night. So Yeah. He wants to be a man of the people.
Robert Swarthout:Yeah. You know? And, you know, in a lot of ways, big credit for him, even outside of his politics. Like, the guy has been shot at twice or well, shot at once, potentially shot at the second time. And the idea that he's still willing to go out in public, a lot of people I think would be hunkered down at home trying to figure out how never to go back outside again.
Robert Swarthout:Yeah. So you guys
Andres Sandate:credit to him. Sure. Well, smoking gun, Silvergate. I know Silvergate was in the news sometime back. So Yep.
Andres Sandate:So we'll do a little bit of, recap of history here. So Yeah.
Robert Swarthout:We're gonna
Andres Sandate:do a history lesson.
Robert Swarthout:Spring of 23, and this is when bank failures were happening. This is when, Silvergate went down. This is when, Silicon Valley Bank went down, and the third one would have been wait. I think it offhand. Not important.
Robert Swarthout:But Silvergate in this case,
Andres Sandate:is It was a big crypto bank. They were a
Robert Swarthout:crypto bank. Almost all their customers were crypto focused company. Businesses funds and things like that. Yeah. They were very specialized.
Robert Swarthout:They were following for all for everything that I've read, they were not breaking any laws, regulations, anything like that. They were following all the KYC email, doing the things they were supposed to do to operate a business. Yeah. This is when Operation Choke Point Choke Point 2.0 went into place and started running. And Silvergate wasn't the first.
Robert Swarthout:I believe they were after SVB, but they basically were told by the Fed that they're gonna have to curtail their business with crypto businesses. Okay. On the surface for maybe any other bank that may be such a big deal because it's probably a portion of their business. Silvergate, that that is their business. So without the crypto business, they would have to reshape the entire firm.
Robert Swarthout:Obviously, that's not something that's feasible in the time that the Fed wanted it done. So that effect effectively made them put them in a liquidation.
Andres Sandate:Yeah.
Robert Swarthout:And it's crazy to kinda see all this come out. There was rumor that they, you know, didn't have funds and there was all sorts of, you know, what didn't be Innuendo and right. Right. Yeah. And flood for that matter.
Robert Swarthout:And it's just now it's coming out in court cases, and this is, like, so sad to see a business is blown up because of political, beliefs and all that good you know, all that bad stuff effectively. So
Andres Sandate:yeah. So they had assets at the at when the smoke clears, because you knew there was gonna be and maybe there will be some hearings on this. Who knows? I mean, often not, this stuff gets swept under the rug, in a way. Right?
Andres Sandate:I mean, the mainstream media news are probably not paying attention to that. You know, maybe the financial news to some extent. But in reality, it's it's a it made a lot of news in the Financial Times, The Wall Street Journal, the major press, CNBC. They were talking about, okay. Is this gonna turn into this contagion?
Andres Sandate:And people in crypto and digital assets knew that this was a very specifically focused financial institution and knew that there was a regulatory mandate out there to go and effectively find find find some Mhmm. Organizations, if you will. It it almost felt that way with choke point 2.0, and it did. Now what's interesting is you get to go back and see that, yeah, maybe they played a little bit of heavy hand, they being the regulators. They being the government.
Andres Sandate:You know? Yeah. It's kinda like what happened to Arthur Andersen. Right? Back with the Enron thing on a different scale.
Andres Sandate:Like, a couple of really bad apples at that firm. I mean, literally took down a historic, you know, accounting audit CPA franchise.
Robert Swarthout:Yep. You know, what's crazy is when we were in the moment, they kept, you know, the regulators and everyone's kept saying, oh, this is not crypto focused. You know, it felt like it to the ones, like you're saying, to the ones on the inside. Now you fast forward to today and you see this stuff is a 100% crypto focused. And the way to kinda illustrate that was is when these banks, these 3 banks in particular, went into, I think, receivership effect.
Robert Swarthout:Receivership. Yep. Into that process, but whatever it was, the those lines of businesses those banks had were sold off to other banks. Everything was sold off except for the lines, and, basically, those were just left on the Florida Rot. And that that just, to me, perfectly illustrates what the agenda was there.
Robert Swarthout:It was a it was a hit job in the crypto industry and, you know, admittedly, I wouldn't say Checkpoint 2.0 is even gone at this point. You know? We've kind of talked about that in the last couple months, but it's, not nearly as strong.
Andres Sandate:And on the heels on the heels of that, we saw all this other activity that was happening in the background. Right?
Robert Swarthout:Right.
Andres Sandate:There was somewhat of a purge, I call it, right, where you saw the finance and you saw FTX and you saw also, you know, these exchange traded products, and funds were in the process of going I mean, there was a lot of things happening Yeah. When you go back and study those 2 years. Right? And we're still in it. Right?
Andres Sandate:We're still very much in it with an election. But, yeah, there was definitely some casualties.
Robert Swarthout:Yeah. It was, a lot of collateral damage back then, and for the most part, that's behind us. It didn't make it on our, actually, no no. It didn't. We'll get to FDX here in a few minutes, so I'll I'll say.
Robert Swarthout:So anyways, I I think that kinda recaps it. The 3rd bank, I did realize the signature bank. So signature, Silvergate, and, Silicon Valley Bank were the 3 big ones Yeah. That that kinda got caught up in this. So and then eventually, Customers Bank got caught up in it as well because a lot of the, the, customers that left those banks went to Customers Bank.
Robert Swarthout:They started that line of business up and grew it, and then the Fed's like, see you later. You can't have that anymore.
Andres Sandate:Right. As
Robert Swarthout:of this last summer. So
Andres Sandate:Yeah. So Well, we can't yeah. We we we can't, all have just bad news about, our friends at the SEC or or our grumblings. You know, one positive development,
Robert Swarthout:over
Andres Sandate:the last couple of weeks is the SEC approved options for BlackRock's, you know, Bitcoin spot ETF. Yeah. I know. Let's unpack what that means because that's a lot. Yes.
Andres Sandate:Anytime additional financial products are created, what my takeaway is you're allowing new market participation. You're allowing, additional, expressions, from market participants of their view on an asset. Right? Maybe it's leverage. Maybe it's I I wanna be long.
Andres Sandate:Maybe it's I wanna be short. What's your takeaway of, you know, what this really means that they approve options for BlackRock's BTC? Does this bring new capital into the space?
Robert Swarthout:I think so, but this is where my knowledge really gets fuzzy, I'll I'll admit. I'm not, like, most up to date on these kind of products. I the first thing that I wondered when I saw it was, you know, does this per present an, a situation where a lot of options get sold, people want them delivered, and then the market, makers in those case have to go to the market to get Bitcoin? If they can't get it, is this functioning like a rehyperification of Bitcoin to the point where, like, there's a run on the bank? Not that there's a bank in this case, but, like, there's a Right.
Robert Swarthout:A systemic problem. I know Caitlin Long. She's from Custodia Bank, a big Bitcoin bull. In many ways, I think she was one of the people that may believe that only Bitcoin should exist, nothing else. But she's her credit for years, she has said Bitcoin, if it's not managed correctly, is gonna take down the GSIB at some point.
Robert Swarthout:GSIB being a systemically important bank.
Andres Sandate:A bank of New York, a a Citigroup, a Chase. Right?
Robert Swarthout:A JP. Anything like that. Yeah. Yeah. So because no Fed that can go and bid more Bitcoin.
Robert Swarthout:Right? Mhmm.
Andres Sandate:That
Robert Swarthout:basically is her point. So I don't know if this starts getting in that territory, but it definitely starts to feel like it to me, as a layman. And, hopefully, it never gets there. I'll say that upfront, but, you know, this is, I guess, further evolution and integration of crypto into the traditional financial system in my opinion. So
Andres Sandate:Yeah. I, yeah, I would just add to it. I think that's a very fair fair point. And I think from a regulatory and I I'd say just financial market health standpoint, I think it's worth understanding the implications of, of of options for BlackRock's, you know, Bitcoin ETF. I do think that there are a lot of folks out there that speculate in Bitcoin or that are, you know, more institutional, trading asset management focused.
Andres Sandate:This is one of 100 of assets that, Bitcoin, you know, crypto in general like, it's just one of 100 of assets that are getting traded every day all over around the world. And, you know, I think when when you when you think about just the spot market being just let's just say buying the stock being long or owning Bitcoin and ETF being long, to think that that's the only thing that we're ever gonna see in these markets, I think, is is naive given the the the level of sophistication. You know, I'm always amazed that lawyers, they can structure everything. They can structure around regulations. They'll come up with ways.
Andres Sandate:Not deviously. It's just that it's it's about, healthy functioning markets in a way. Just
Robert Swarthout:Yeah.
Andres Sandate:Hopefully not taken too far.
Robert Swarthout:Yeah. Agreed. And this is not necessarily exactly on this point, but we were talking before we started recording. So about the BlackRock ETF. So Eric from Bloomberg was saying now, you know, he looked at the top 10 biggest ETF launches of this decade, so since 2020.
Robert Swarthout:And 2 of the top ten are Bitcoin ETFs. All of them are at least 10,000,000,000 of AUM. BlackRock is currently at just over 23,000,000,000, and the Fidelity one is just over 11. It's just crazy to see what these things have done in 7 months.
Andres Sandate:Yeah. The market adoption for sure on the Bitcoin side. Yeah.
Robert Swarthout:It has been incredible. So will this help fuel more of that? I mean, options on top of it. I don't know. It'll be interesting to see how it how it affects the market.
Robert Swarthout:I can see it adding volatility to the Bitcoin price, for sure. So Yeah.
Andres Sandate:I mean, there's 2 theories. I mean, one is you'd think with more market adoption, they these spikes that we see in volatility in certain crypto assets, right, would start to minimize. Right? And and I think there's a lot of academic research and probably asset managers, you know, that have put out a lot of research around this. And a lot of investors are okay with volatility of the upside.
Andres Sandate:It's the volatility of the downside, right, that is so synonymous with with, episodes in crypto that, you know, I think causes some people hesitation. So there's gonna be obviously options activity there as well in terms of, how this plays out. It's something we'll have to continue to track. But, yeah. So our friends at the SEC were, you know, they they were hold up to or they, I guess they drove across the street to, testify in front of the, House Financial Services Committee.
Andres Sandate:Right?
Robert Swarthout:Yeah. So all 5 commissioners, were in front of the committee for the first time collectively, since 2019. So it's been a while.
Andres Sandate:Yeah.
Robert Swarthout:A lot's happened. Ag and Gensler wasn't in, in that seat. It was, Jay Clayton and all that stuff. But it was, I watched the hearing. I don't generally watch hearings, but I watch this hearing.
Robert Swarthout:Good for you. After the fact, I admitted it was
Andres Sandate:Oh, okay.
Robert Swarthout:I I didn't set my I didn't set my, my, alarm for it. I'm not that crazy, but it was fascinating to watch. So Patrick McHenry That's a beat. I was gonna say. And he in his opening remarks, he referred to the SEC as a rogue agency.
Robert Swarthout:So, like, that set the tone. Set
Andres Sandate:the tone. Right.
Robert Swarthout:And they were there for more than just crypto. It was the SEC there. It wasn't the SEC crypto there, to be clear. But, man, like, you could you have 5 commissioners. So you have Gensler and 2 democrat appointed ones, and you have 2 republican appointed ones.
Robert Swarthout:Hester Peirce largely is the the most well known republican one that is crypto focused. We're gonna focus on the crypto piece of what happened in this in this hearing, but you couldn't be more more apart, Gensler and Pers in this case. Gensler, you know, I like, I wrote in my newsletter. Like, the part that entertained me the most was when he would squirm, and you he could just see he was uncomfortable when, like, Pers and the other ones were basically saying how bad of a leader he was. And they didn't call it that, but, like, saying we the agency, has not followed its duty.
Robert Swarthout:And it's it could be doing the hard work, but it's not. Like, I mean, I'm paraphrasing here, but Sure. It's just pretty incredible to kinda see, basically, colleagues that literally have to sit down together to work on things to be so, I wouldn't say, adversarial, but just so at odds. And, you know, you need It
Andres Sandate:it kinda make it begs the question. Right? Like, we're not regulators, so we're not inside the room when they're discussing, let's just say, key key priorities. Right? The regulators are there to, you know, enforce or put it not enforce, but put in place, they get a mandate from congress.
Andres Sandate:Right? And they're they're supposed to set up, if you will, frameworks, rules, etcetera, that allow functioning healthy markets, protect investors as well. But, yeah, it's like this this dynamic where you have people that somewhat sit there on Hester Peers' side who are more pro crypto. Let's not enforce through regulation. Let's actually talk to the industry.
Andres Sandate:Let's figure out how to be, you know, one of the one of the countries that's leading the charge, and then you have this whole other faction. I was gonna I was I was thinking you were gonna say it was theatrical to hear the congressmen and women Mhmm. Talk about digital assets crypto and whether or not their level of understanding, given their elected officials, you'd think their job is in this committee, financial service committee, to really have a basis of understanding about what's going on. I was curious what what your takeaway there was.
Robert Swarthout:From their standpoint, I would say it's not all republic and democrats. I mean, the, the gentleman from New Jersey or New York, I forget his name. I'll probably remember here in a second, but definitely Democrat when it comes to how he votes typically, but, like, ripped into the SEC about how they're dealing with crypto. Like Yeah. Much like many of the Republicans did.
Robert Swarthout:So, again, it's more of an age thing than it is a Democrat Republican thing, but, you know, here's a couple quotes that from Hester that's kind of illustrate. I think we've fallen down in our duty as a regulator not to be precise, and so tucking into a footnote that we admit now, actually, that the token itself is not a security. That's something we should have done long ago. Then we should started wrestling with the difficult questions. Like, she's just basically saying, we're not doing our job, you know.
Robert Swarthout:And when we finally get corrected, we put in a footnote we don't really own it, and then we try to move on and act like it never happened. So Yeah. It's, Well, I saw some
Andres Sandate:news, whether it's considered news or it was more of a tweet. Speaking of the f SEC and Gensler, that is Mark Cuban, the former owner of the Dallas Mavericks? Yes. I don't know who's behind this, but they're floating this idea that he would be interested potentially in, you know, being the chair of the SEC of Trump. I'm not sure I I'm not sure how real that is, but Mhmm.
Andres Sandate:Certainly got a lot of headlines in crypto land.
Robert Swarthout:Yeah. So I I remember seeing that tweet, and I forget who to credit it to. The rumor is even if Kamala gets re gets elected, Gensler's gone. That that sounds like that's, maybe he I've heard that. He's had ambitions to wanna be the Fed chair.
Robert Swarthout:I don't know if that's gonna or the Treasury Secretary, excuse me. But we'll set it all aside. Say we need a new SEC commissioner and it's Kamala that's elected, To think that it's Mark Cuban,
Andres Sandate:this is what it's gonna be. Yeah. It's gonna require a Trump win.
Robert Swarthout:Well, if Trump wins, there's no way it's Mark Cuban. Because Mark Cuban has been very anti Trump. I I just can't Oh, is he anti Trump? Okay. He's been very anti Trump.
Robert Swarthout:He's been tooting the Kamala horn for Gotcha. Couple weeks pretty heavily. But the idea that the guy that was sued by the SEC would go and then work for the SEC, it's, like, doesn't seem like a match made in, I don't know, Washington heaven. But
Andres Sandate:Yeah. Yeah.
Robert Swarthout:It's just ironic at best. So I don't know. We we we will Interesting. See how that
Andres Sandate:This is this is not crypto check-in news quality, so we'll get off the the gossip and innuendo. We'll get back to the FTX estate. There's been some big checks cut here, out of this estate. The FTX bankruptcy, of course, is Yeah. Progressing through, the bankruptcy process, and now folks are starting to get paid.
Andres Sandate:Whether they were the original, claimants or they bought claims in bankruptcy, you know, process. Yep. What's what's your take on the distributions in this So
Robert Swarthout:it sounds like they're just starting, like, in the last couple days. Not everyone's got their funds. The the little bit that I've seen on Twitter is roughly $16,000,000,000 will be distributed. It's a lot of money. Yeah.
Robert Swarthout:And in this case, this one guy's friend had $1,700,000 apparently that he received, and he's putting it all back in a crypto eclipse, you know. So could be totally false, it could be true. I don't know. But this stuff is coming soon, and it seems like I wouldn't say that the FTX estate is trying to time anything, but it seems like the perfect time to do it. From a crypto market perspective, if you want the money reinvested back in the market.
Robert Swarthout:We've had a relatively rough 2 q2 and, q3 was a little bit better than q2, but, like, generally, q4 is better. We've talked about this last time I recorded. And, you know, they they call October October for a reason because it's generally a positive. Right.
Andres Sandate:Yeah. Any coincidence? I know you have a little bit of a a conspiracy theorist, streak in you. Yeah. Any any coincidence that distribution start, right after Caroline Ellison is sentenced to 2 years in prison?
Andres Sandate:I'm just curious. I mean, maybe it's heard that.
Robert Swarthout:That's
Andres Sandate:No. No. Maybe it's totally coincidental, but I saw that last week, she she got hammered with 2 years. Whether that's the right number or not, I know you felt strongly that, SPF should have gotten a 100 years and ended up getting, you know, getting a
Robert Swarthout:a license to send you that. You can convince me that he got her sentence, and his yeah. I should have been much more. But, no one asked
Andres Sandate:me to. She's going away for 2 years. I don't know how much time she'll serve, but I know we have another headline, in here about, you know, a prisoner being released.
Robert Swarthout:But, yeah, you know, it's the FTX estate, I mean, once that money gets distributed, it it's a bit of closing the chapter. Right? Like that year 2022 and all the craziness that happened, it'll be nice to finally put that behind us. And, you know, again, investors are getting made whole to what the funds value that they had back in November of 22. They missed all the run up of last year, but Sure.
Robert Swarthout:And and part of this year for that matter. But it's
Andres Sandate:Well, there's a lot of there's a lot of hedge funds that did did very well in this trade because they bought claims for I would own them if they bought them for pennies on the dollar, but I think, you know, they probably bought them for between, 20, 30, 40 cents on the dollar, and they're gonna they're gonna make out whole. So once again, you know, the big money, smart money, quote, whatever you wanna call that money.
Robert Swarthout:That that
Andres Sandate:money Yeah. Patient money. They, yeah, they came out. They some of them, anyway, that participated here came out, pretty good pretty pretty good place. So I think in terms of headlines, though, the one that I was most excited about this week is this next one about, you know, BNY Mellon, and they're approved for crypto custody.
Robert Swarthout:So we're gonna talk about I know it's certainly not the oldest business in the country, but it's pretty high up on that list.
Andres Sandate:240 years is pretty old. Yeah.
Robert Swarthout:Right. It it almost predates the country somehow. But, you know, they were they're the largest custodian in the world. I think everyone probably knows that. But they got approved by the SEC to custody crypto.
Robert Swarthout:And up until this point, banks could not custody crypto because of Saab 121. We've talked a lot about this in the podcast over the summer. It was Yeah. Almost got, repealed. Biden vetoed it, and then the override did not happen or it did not succeed.
Robert Swarthout:And so now the SEC appears to be picking winners and losers in my opinion. You have the SEC saying, yes, you can do it by this format. No. You cannot use you cannot custody crypto bank x y z. Maybe the SEC should just, you know, set some rules in place about how this can happen and does not have to have this rule.
Robert Swarthout:You know, maybe a novel thought there. I know it's probably a lot asking, of this SEC, but it's a, it's it's cool to see BNY. Right? I mean, this is, like, the ultimate stamp of approval.
Andres Sandate:Right. $60,000,000,000,000, you know, firm in terms of assets under custody or administration. I mean, ahead of even State Street and Yeah. You know, Citigroup. These these are these s you know, these these sizable global institutions, too big to fail by every standard.
Andres Sandate:And so, yeah, I mean, I put a note in the letter as well just because I think, as you pointed out, this is this is probably not getting enough run on on on the news. In crypto circles, it may be, but certainly more broadly. And as the backdrop is that advisers and investors and institutions are starting to do more than dabble in crypto, they're starting to really, you know, build it into their their models. And, you know, it comes on the hills of one additional note I put in the letter, which is, you know, I I think we'll get to this in a minute, but Bitwise's, chief investment officer, Matt Hogan, who we've talked about on the show before, but he was, he was presenting at the Barron's 100 Advisor Conference, which is a summit of some of the top advisers around the country, many of which are connected to wirehouses and large, large bank platforms like UBS, Merrill's Merrill Lynch, Morgan Stanley.
Robert Swarthout:Mhmm.
Andres Sandate:Many of which those institutions have not fully embraced crypto. And those advisers are doing it, but they're doing it, you know, more personally as evidenced by the fact that Matt said a year ago and 2 years ago when he asked by a show of hands how many you own crypto personally, he said 10 to 20% of the hands went up in the room. This year, he asked by a show of hands how many of you own crypto personally. He said he estimated 70% of those advisers in the room said they own crypto. And it would make sense if you're an adviser that you're you're probably gonna you're probably a smart one anyway, a big one that's got a $100,000,000 family client.
Andres Sandate:He's probably gonna wanna try out the experience of owning crypto and then say, yes, mister and missus billionaire. I own crypto. I think you should own, you know, x percent. And, so you start to put this narrative together that BNY Mellon's custodying it. More and more big advisers are starting to own it personally.
Andres Sandate:You know? Does that mean over the next year or 2 as we get more adoption? Can't speak to what that does to the price, but, certainly, there's only so much Bitcoin. And Right. We've heard that whole narrative before.
Andres Sandate:And once people start to test this crypto out, does that mean, okay. Now they're willing to look at Ethereum. Now they're willing to look at
Robert Swarthout:Yeah.
Andres Sandate:XRP. Now they're willing to look at some of the other things. So Right. It's interesting.
Robert Swarthout:I definitely think there's a trickle down effect. I think what we haven't talked about in the b and y thing, which we won't we don't answer to now, is how much of it how much of this is a threat to Coinbase? Because Coinbase is like basically the custodian for almost all these ETFs outside of Fidelity. And obviously that could affect Coinbase's stock and all sorts of stuff, but long term, it'd be interesting to just kinda see where these things shake out. So
Andres Sandate:Yeah. Yeah. And maybe they're a candidate to be acquired as one of these big institutions says, you know what? We've been kind of behind on crypto. We find ourselves behind all of a sudden.
Andres Sandate:Like, look at Intel. Look at look at the look at the Intel story with NVIDIA and chips. Right? Yes. I mean, I I know for myself, like, 10 years ago, I hadn't heard of NVIDIA.
Andres Sandate:Right? Mhmm. And now all of a sudden, you know because I everybody had an Intel chip. Now you look at those 2 companies, and they're couldn't be going in different directions.
Robert Swarthout:So
Andres Sandate:Correct. Yeah.
Robert Swarthout:Yep. So next topic here, this will be brief. So October 7th is the last appeal date. So I'm referring to the Ripple SEC case. So around I don't think it's exactly, August 2nd, but around that date, that was when the, Judge Torres gave her final judgment ruling.
Robert Swarthout:They have both sides had 60 days to appeal. Ripple says they're not going to. The SEC has not said anything. My guess is, at a minimum, they're gonna run out the clock and not do it, and they just kinda let it, die off that way, or I could see a last second appeal. I mean, that's the way this SEC has worked.
Robert Swarthout:If there's gonna be one, it's gonna be how to create the most uncertainty in the market, and that's probably how you'd approach it. So next Monday, I think it's 5 PM EST is is technically the deadline, maybe 6 PM, and, we'll know at that point. But it is interesting timing. We it's the our last bullet point here, but, like, with Bitwise filing an XRP ETF, I don't think that while they both talk about XRP, I don't think they're actually connected at the end of the day. Yeah.
Robert Swarthout:But the timing is interesting nonetheless.
Andres Sandate:Yeah. Yeah. Well, I we we can't skip over the second to last bullet because Okay. Okay. CZ gets released from prison.
Andres Sandate:CZ is still the largest shareholder of Binance. You know? I don't know if he's officially the chairman or doesn't have an official title. He's no longer the CEO. But he still has the largest shareholder, so he's financially still gonna do very fine, doing doing well.
Andres Sandate:Yep. He gets out of prison 2 days early, I heard, because of the weekend.
Robert Swarthout:And Yeah. And it fell on the weekend. I know.
Andres Sandate:I know it's normal, but I it's just ironic that, like, the guy gets a short sentence for, right, his thing, and then it's like, okay. We're gonna let him out on a Friday because it's kind of like, we're not working Saturday Sunday to process prisoner releases. Right.
Robert Swarthout:It it it does not. Like, you you think they spend all 7 days keeping people in? They could use all 7 days letting people out. I'm like, why can't we let
Andres Sandate:the guy go on Monday at 6 in the morning? I mean Right. Come on. The dude I mean, it's just Yeah. It it it you know, I know this happens every day, and I'm not making light of, you know, the the prison system and all that.
Andres Sandate:But it's just it just makes you shake your head. Like, as much as you shake your head at Gensler and, like, oh my god. This makes me shake my head. It's like this guy, you know, arguably, if you read the indictment, I mean, he he was allowing, you know, terrorists and criminals and anybody that wanted to own crypto to process and own crypto through, you know, through their platform, but I digress. Exciting news.
Andres Sandate:Back to bit wise.
Robert Swarthout:Well, the last thing I'll say about CZ here is
Andres Sandate:Oh, you got something on CZ. Okay? I have something
Robert Swarthout:that, didn't make in the notes, but the so he started tweeting the next day. Right? He's like, good morning. He did his whole normal thing. And then, at one point he said, oh, I'm, you know, I'm happy to see that Binance is doing well, and he he's trying to start up an education company of some kind, some startup.
Robert Swarthout:But he said, good to see that Binance has done well, I'm paraphrasing here, even without the back seat driving. So even when I told him to leave, he acknowledges that he was doing stuff. I'm like, okay. Driving the bus. Yeah.
Robert Swarthout:Yeah. Yep. Of course. Anyways, onto our last point. So Bitwise, we we've talked a little bit about it already, but Bitwise has filed for an XRP ETF.
Robert Swarthout:They created the company last night on October 1st. It was showed up in the Delaware, registry, And then as of this morning, they did their press release, announcing that they are that they have filed provisionally, with the, SEC for an s one. Yep. I'm surprised, Emmett. I did not see this coming.
Robert Swarthout:The only time I saw it coming was with a change in administration, whether that's, you know, 3 months or, 4 years from now. And yeah. I mean, Bitwise, I get credit to them for being a bit, I guess, pioneering here of sorts. And we'll see how it goes. It could be a long drawn out process.
Robert Swarthout:You know, Bitcoin, the first application was over 10 years ago, so hopefully it doesn't take that long. But we can maybe see some progress here with other ETFs getting launched.
Andres Sandate:You know, one thing to think about here is they they have a platform, Bitwise. I don't know the entire business, but having sat there in their offices, they do more than just ETFs. Right. Right? So, you know, when when you're out there and you're talking to institutional investors and you're, talking to advisers and you're speaking to, you know, rooms full of people like they are about this new asset class Yeah.
Andres Sandate:You you kinda do have to keep I'm not saying this is why they're doing it. I have no idea. I don't have any information. I'm just speculating here. But you you do it does to me from a strategic standpoint, if I'm their firm, it does keep us in front of people as an innovator, as a we're we're gonna not push the envelope, but we're, you know, we're trying to create ways for you, the investor, to express your views on digital assets.
Andres Sandate:You know, as an asset manager
Robert Swarthout:Mhmm. If you
Andres Sandate:look across what's happening in the industry, you know, those that have the resources and the means for distribution, product development, etcetera, and they have brand, like and they can deliver a customer experience. They're they've got a lot of tailwinds at their back right now. And so for me, like, I'm looking at this and saying, yeah. This is obviously great for somebody that's into crypto and digital assets. I love to see more of this happening.
Andres Sandate:But for them, I'm looking at it and saying, this makes complete sense. Smart move, and it's gonna keep them out there in the news, in the in the conversation, you know, at least for the foreseeable future outside of just what's going on in Bitcoin and ether.
Robert Swarthout:Yeah. It'll be interesting to see. And I was just trying to remember, we talked about it maybe 2, 3 episodes ago about how one of these, issuers had, filed for a product that was gonna be an index. Do you remember was that Bitwise? Do you remember offhand?
Andres Sandate:I don't. I don't remember offhand.
Robert Swarthout:We'll have
Andres Sandate:to go back and look that up.
Robert Swarthout:This may have if it was Bitwise, this makes total sense now. Right? I mean, like, if you're gonna have an index product, you need to probably have more than 2 things in it. Yeah. And, you know, this being the 3rd.
Robert Swarthout:So, obviously, they have a lot of work to do here. They have an SCC to be convinced, that this needs to be something the market, can have access to. And admittedly, there's a lot of drama at the SCC around XRP.
Andres Sandate:Yeah. All the technical history of that.
Robert Swarthout:So, hopefully, that doesn't come into the the the calculus of this, but it wouldn't surprise me if it does. Yep. So awesome. Well, thanks for joining us on this episode of the weekly crypto check-in. If you want to stay updated on future episodes, you can find us in any podcast player by searching Teton Crypto Capital or the weekly crypto check-in.
Robert Swarthout:Take care.