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Topics covered in this episode:
- Perspective: 11% vs 300%
- Ripple to launch a USD-backed stablecoin
- Bitcoin gains are happening after-hours
- $IBIT nearing $20B in AUM
- Court rules crypto, not securities, on secondary markets
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.
Hello. Welcome to another edition of the weekly crypto check-in recorded on April 10, 2024. I'm your host, Robert Swerta, and I'm joined by my cohost, Andres Andate. How's it going, Andres?
Andres Sandate:Hey, Robert. I I know that first headline has got your tongue tied. It's 300 versus 11%. It's like not not something you see often, but it's good to see you. I'm, streaming today from, Manhattan.
Andres Sandate:It's my first trip to New York since before COVID.
Robert Swarthout:Oh, wow.
Andres Sandate:So I, I hope I'm audio and video coming through clear. It's good to see you.
Robert Swarthout:Yeah. Good to see you. And, hopefully, I don't sound too nasally. I'm dealing with some allergies, so I think I'm gonna attribute part of that to my tongue tiedness here today.
Andres Sandate:Well, quite a bit's happened over the last week.
Robert Swarthout:Yes. Yes. It's, you know, we had more bullet points to talk about last week, but this week, you know, it's kinda a little more varied, which is nice.
Andres Sandate:Mhmm. Yeah.
Robert Swarthout:You know, the first one is probably a bullet point. It says perspective, 11% versus 300%. It could mean anything and everything.
Andres Sandate:That's right.
Robert Swarthout:But in this case, we're we're kind of referring back to what the SEC is if you can't go and look at the numbers, but the SEC is asking for a remedy in the, the Ripple case. They're asking for just shy of $2,000,000,000, 1.95, and it's more than, you know, what the unregistered sales were of 728,000,000. And you kinda go back and somebody posted this on Twitter. I found it really interesting. If you go back and look at the other crypto cases that the SEC has settled in some form, whether they went to, actual court or not or whether they were just settled outright initially, you see something as low as 1% and something as high as 75%.
Robert Swarthout:Nothing ever equal to the sales or or what they consider the the problem. But in this case, they think Ripple's due to pay 300%. So
Andres Sandate:So 3 times so so the SEC, if I'm understanding correctly, they're asking Ripple to pay 3 times the amount of securities that were actually sold when in prior cases, that was 11%.
Robert Swarthout:Well, in one case, it was 1%.
Andres Sandate:Well, right. But on average, it's been
Robert Swarthout:But on average, I would say, I don't know. It varies so widely between Yeah. 75%. And there's 1, 2, 3, 4, 5 cases here. One of them, the the lawsuit actually put them out of business.
Robert Swarthout:That was the one that it was they only had to pay 1% on top, You know? So I
Andres Sandate:don't know.
Robert Swarthout:The SEC I'm not sure who the SEC is protecting, because they're supposed to be protecting, you know, retail investors, and they in that case, they put people out of business and the token went to 0.
Andres Sandate:Right.
Robert Swarthout:They really taught them
Andres Sandate:the best. But a lot of these sales from Ripple were offshore.
Robert Swarthout:Oh, I think over 80% of them. So 80% of that 728,000,000 were offshore sales, and then none of the investors, in any case, lost money. So it's just, you know, just kinda show
Andres Sandate:Yeah. I'm curious what your takeaway is. I know I I think I have a a good sense, and some of our listeners who tune in to the show weekly probably have a sense for your your point of view on on, you know, the SEC's approach to the space has been through enforcement actions versus maybe working more proactively with the space to try to get legislation, which I think the industry would like to see. But what's what's your take when you look at this, this dollar amount, like $2,000,000,000?
Robert Swarthout:You know, it's, it it's it's a joke. I mean, you know, I have to in some sense, I have to be careful. Right? Like, you know, this Teton Crypto Capital is a fund that the SEC potentially could care about. Yep.
Robert Swarthout:But, you know, if you kinda rewind, Gensler, who's now the head of the chair of the SEC, he when he was teaching at MIT about this stuff, he said there needed to be clarity, and he's and he had opinions about all these things. Now he gets the SEC, and he's basically saying the exact opposite or saying it's clear, it doesn't need problems. It's, like, extremely hypocritical. Yeah. So I'm just kinda tired of it, and I'm ready for, to be new leadership.
Robert Swarthout:And, actually, to actually show leadership, there's no leadership right now. It's it's pure, just a regulated run amok, unfortunately. So
Andres Sandate:Mhmm. Well, let's talk about, to pick up on Ripple. There was news that came out that, Ripple's to launch a USD stable coin.
Robert Swarthout:Correct. Yeah. They they did that late last week, and it was admittedly a surprise to me. I didn't really think that they would be getting in the game. You have relatively entrenched players with Right.
Robert Swarthout:Other USDT by far the biggest, and circle with their USDC, at least from a dollar perspective. They're, I mean, they're 60,000,000,000 probably. Haven't looked lately, but it's it's a great business if you can be in it. With interest rates where they're at, you know, these, you know, they're throwing off 1,000,000,000 of dollars a year in interest, that these, I guess promoters get to keep. So to see that Ripple did it, like I said, caught me off guard, but I started thinking about it.
Robert Swarthout:The XRP Ledger, which Ripple cares about, doesn't have a stablecoin on it for all intents and purposes right now. So it will bring liquidity to the XRP and other tokens that try to launch off at the XRP Ledger. And it obviously is if Ripple could do it, it's a great business for it to, kinda be in. So
Andres Sandate:Sure. Yeah. Because they have a lot of stuff offshore, Ripple, that they're doing in focus.
Robert Swarthout:90% of their business and customers they're doing help on GUS. So yeah. It's, you know, I in some ways, they're slowly building up a suite of stuff that they can offer clients, and almost like a one stop shop. It'll be interesting to see how it evolves. They haven't announced the ticker or the release date, but they did say that it will be launched on the XRP Ledger and Ethereum.
Robert Swarthout:So it'd be a kind of a cross bridge, to kinda draw some money in. Kind of their thinking is, this is a a Stablecoin is a bridge to traditional finance to be in a DeFi system. They kinda give them something to use that it feels a little bit more normal, And maybe over time that, you know, they may choose to branch out and do other stuff. So
Andres Sandate:Okay.
Robert Swarthout:But by the end of the year is all they're saying it'll be launched. My guess is, the next 3 or 4 months.
Andres Sandate:So Sure. Something to continue to track in the headlines. This third one, Bitcoin gains are happening after hours. We were talking about the this on a prior, crypto check-in. Lot of the, you know, a lot of the folks that are newer to Bitcoin, they're buying it through the ETF.
Andres Sandate:Right? But a lot of these assets are traded globally on various exchanges. So what's up with this, you know, I guess, this this news piece that you found to be relevant and interesting?
Robert Swarthout:Yeah. You know, it just it it felt like this was what's happening, but it somebody actually put in a chart and talk about it. I guess, made me feel that I wasn't crazy, I think, is part of it, admittedly. But, you know, if you kind of look at between, you know, US eastern hours of 4 PM up to 9:30 in the morning, there are certainly times that Bitcoin will run-in the evenings, 5 or 5:30. You'll see some bit of an increase there, or you'll see it right before the market opens in the morning.
Robert Swarthout:And if you also look at the Bitcoin futures, you'll see the price, sometimes before market open in the morning, actually get beat down in Bitcoin, and maybe that's when some of the buying happens. The rumor is that Jane Street is the one that's running those futures and kind of quote unquote manipulates the price, considering
Andres Sandate:Jane Street being one of the market makers for a lot of the, like, listed listed over the counter product.
Robert Swarthout:Correct. Yes.
Andres Sandate:Yeah. And when you reference 4 PM to 9:30 AM, you're sort of taking the inverse of what are standard market hours for the US exchanges. So for example, the major exchanges where stocks are sold daily open at 9 AM EST 9:30 AM EST, pardon, close at 4 PM EST.
Robert Swarthout:Right. So, yeah, basically, the inverse of those open hours.
Andres Sandate:Right.
Robert Swarthout:Or weekends for that matter. Right. Can be pretty quiet, but so you have the inverse, I think, you know, so some of it's the Bitcoin futures and maybe trying to be opportunistic with buying the Bitcoin they need to be able to create the shares in these ETFs. And you kinda couple that with the opposite. Ours are Asia.
Robert Swarthout:And Asia does is in the crypto business and Yes.
Andres Sandate:They are.
Robert Swarthout:Algos go in there. So it's just fascinating to kinda see. But, yeah, 40% of the gains, are after hours, and there's lots of gaps in the charts. If you're a technical analysis person, there's lots of gaps. That's good and bad depending on what side of the gap you're on, And, the whole idea is gaps get filled.
Robert Swarthout:So
Andres Sandate:Well and we've heard yeah. And we have heard from, you know, from from calls that we've both been on that, one one of the strategies that has become, I would say, more not not a strategy, you know, that that we do execute or that we're interested in, but, but certainly a strategy that is that is present and is becoming more, more and more of a market, participant are those that are trading on the volatility in prices.
Robert Swarthout:Absolutely.
Andres Sandate:So that that would gel with, you know, this, you know, this research that you, that you found.
Robert Swarthout:Yep. Yeah. It's, you know, more Bitcoin. I I went went from never really having to think about Bitcoin for the fun to now all I feel like I talk about is Bitcoin these days.
Andres Sandate:Well, it seems like sometimes we're, like, very heavy and legal in Bitcoin, you know. But that that's just what dominates the headlines. Typically, we try to report on some of the major headlines that we think should, you know, potentially get, you know, some of some of serious crypto investors' attention. So, you know
Robert Swarthout:And and it there's no denying that, Bitcoin draws people into the space.
Andres Sandate:Oh, yeah.
Robert Swarthout:They choose to go further than Bitcoin. You know, over time, that will be to be seen, but it's definitely the, the brand name.
Andres Sandate:Yeah. It's what brings them in. Right? Okay. Well, let's move on to, you know, our our our topic of, ETFs and IBIT.
Andres Sandate:IBIT is nearing $20,000,000,000 in assets under management.
Robert Swarthout:Right.
Andres Sandate:Incredible.
Robert Swarthout:It's incredible. I mean, it's they launched January 11th, so you're roughly 3 months out from that. And certainly by then by tomorrow, I'm guessing you will have crossed that 20,000,000,000. And to think that Larry Fink originally thought that they wanted to have 5,000,000,000 by the end of 2024, maybe he was being a little bit conservative with his estimate, but it's it's impressive what this, what this particular one has done and also the Fidelity one. FBTC has been very strong as well.
Robert Swarthout:They're still on their consecutive days in Flowstreak last time I looked. So
Andres Sandate:Yeah. And and it's does it become a a tale of of 2 or 3, let's call it offerings or products? How would you characterize the the market? Because I know that there were multiple ETF or exchange traded funds launched. Yeah.
Andres Sandate:There's 9. Okay.
Robert Swarthout:9 plus the, conversion of the grayscale into an ETF. So there's 10 of them. There won't be 10 long term. I I don't understand how they differentiate themselves besides fees, and at that point, like, is it probably not profitable for the bottom half even right now. So we'll we'll see.
Robert Swarthout:I mean, as as the price appreciates, obviously, that helps, their AUM number go up just kind of naturally.
Andres Sandate:Well, guess who is advertising guess who is advertising in the Atlanta airport yesterday Greyscale. On their electronic billboards. Greyscale.
Robert Swarthout:Yeah. It's crazy. I mean, they certainly have well, they're making their fee as a 1 a half percent, so 5 times what these other ones are. And they had tons of, AUM to begin with, so they've been bleeding a lot. They've bled over half their AUM since launch, as an ETF, and, you know, I don't know where it goes.
Robert Swarthout:It you would think it goes close to 0 at some point. Like, why would anyone stick around in it? Yeah. But
Andres Sandate:they definitely have Especially in yeah. Go ahead.
Robert Swarthout:They definitely have the dollars to spend on marketing because they got that, that's the fee flow. So
Andres Sandate:Yeah.
Robert Swarthout:I don't know. But, yeah, I the last two times I've been in the airport, I've noticed that I'm like, wow. They they're still spending. Like and it's obvious that nobody wants them.
Andres Sandate:So Yeah. Okay. Well, gosh. We're mowing through these topics today. So, but back to back to another legal case.
Andres Sandate:So the court ruled the crypto, not securities on secondary markets. What's this what's this, headline, and why why did you find it to be, I guess, interesting this week?
Robert Swarthout:Well, so this goes back to the Coinbase case, Coinbase and SEC. We talked about it a little bit last week where the judge threw out the part where Coinbase Wallet, was not acting like a broker. That's a win for the industry. And then kinda cleaned up some other stuff in the case, and the judge ruled that any crypto sold on a secondary exchanges like Coinbase, would not be viewed as securities. You know, that that's great to hear.
Robert Swarthout:Right? The more times we hear this, the more, I guess, it becomes law, the less the SEC can try to find another way to argue it. And maybe at some point, they'll decide they need to go bark up another tree. It's just, you know, it's unfortunately, we just have to go through the courts to kinda get to it, but it's it's good. I mean, granted, it could be sold as a security.
Robert Swarthout:It could be packaged to me. We got there originally with oranges. Right. So how we test? So we could Yeah.
Robert Swarthout:Certainly see it, but that's not the way Coinbase runs their business. So that was good news. Yeah.
Andres Sandate:Well, I I, you know, I one of the things that I wanted to, include today in our conversation was, you know, as you as you look at we came to the Q1, and a lot of eyes, you know, were on the launch of these ETFs. We've now had several months to talk and see the market's reaction. We also have the having coming up expected sometime maybe in the next week to 10 days?
Robert Swarthout:Maybe 2 weeks ish, something like that. Yeah.
Andres Sandate:Yeah. As you put those 2 together, right, the news and the headlines about, IBIT and these other ETFs and the expected halving, what's your overall sense and sentiment as you look at just, the market?
Robert Swarthout:You know, I think well, I hesitate to say if you look at the patterns from the past, you go into a having and then it kind of maybe it takes a a quick breather, but then kind of starts heading north up into the right. Excuse me. You know, these these Bitcoin, ETFs have somewhat changed the game. I'm hopeful that we still see the pattern that we've seen in the past. If we certainly feel like we're in a bull market, other altcoins, if you kinda look at it from that perspective, are holding strong.
Robert Swarthout:Bitcoin's dominance is one way that you can look at the market like Bitcoin compared to everybody else, kinda what that ratio is that continues to kinda come down. You see that in the bull market cycle where it comes all the way down and then bottoms. And then as you get into a bear market, it basically reverses, and Bitcoin tends to become far more dominant. Will this be the last time we see that? I don't know.
Robert Swarthout:I'm partial believer that this is our last FOMO cycle, A 100% FOMO cycle. I think we start to get to seeing cycles in the future where some tokens are only gonna be at the casino ever, like we are now, and other ones will be more utility driven. I'm, I may be be a little bit biased there, obviously, but I, you know, I hold to that belief that we are nearing the end of this casino phase of crypto, or at least they have a portion of it.
Andres Sandate:Yeah. You were you and I were on my show yesterday with with, with an attorney who does, I have a, you know, pretty robust practice. I think it's fair to say when it comes to, you know, the the alts business. And he was saying, you know, that that from his perspective that we were in kind of 2 point o or the second inning of of of the space. And I think he traced, you know, his experience back in the space to 08.
Andres Sandate:Any initial takeaways or thoughts from, you know, his his reaction? You know, he he seemed to think that, that the SEC and him being a former enforcement attorney, his take was, you know, they they being the SEC, had a hard time getting their arms around the industry because the industry was full of a lot of people that were you know, they didn't have good intentions. And and so now we're kind of in a different environment post FDX, Binance. Just curious what your your thoughts were from that conversation.
Robert Swarthout:Yeah. I I've used the baseball analogy in the past. I said last summer when the the SEC Ripple ruling came out that XRP wasn't security on secondary transactions. That was, July 13th last year. I said that's when we basically just sang the national anthem, and she said the judge said play ball.
Robert Swarthout:Like, that that's I I when he said we were in the second, 3rd, 4th inning, whatever he said yesterday, I was like, maybe maybe I would agree with the smaller number there. Yeah. But, you know, until there's regulation, we're not terribly far in the game, and we we still need that. So, yeah, hopeful that we might get stable coin regulation this year. I'm starting to hear a little bit more about it.
Robert Swarthout:You can tell that it's actually probably more is happening behind the scenes because Elizabeth Warren came out yesterday and was talking about how the bad stuff that happens in crypto. So that probably means someone else is probably provoking her.
Andres Sandate:Yeah. Something else is coming. But what do you make of Patrick Henry? I mean, he's retiring.
Robert Swarthout:He's right.
Andres Sandate:Yes. He's acting And I've read the congressman from North Carolina that was one of the, you know, one of the few congressmen or women in in DC who I wanna say was pro crypto, but was at least open door to the industry.
Robert Swarthout:Yeah. I mean, he was trying trying to push for legislation. Like, I would I would actually go as far as to say he was pro crypto. And he was, he's been quoted as saying that I don't know if publicly or people have said he said this kind of thing, that he wants, this some crypto regulation to pass and that kind of to be his, I guess, final final act of of sorts. I hope he's successful.
Robert Swarthout:Even if it's stable coin, we just need something that'll be, like, a building block to base off of. So, yeah, you know, it's just, you know, the same time you see stable coins, that's our popping back up. You had the ripple news that we talked about where they're launching a stable coin, and then you had some, some news that really didn't follow too closely out of the EU where they were talking about some regulation around stablecoins. And, so I don't know. Everyone's talking about stablecoins also, so maybe we will get it this time.
Robert Swarthout:I'm not sure whether congress can get anything done right now, but we'll see.
Andres Sandate:Yeah. We're in an election year, and it's, obviously, there's a lot of big, big topics, dominating the headlines, you know, and and within those is obviously, more regulation or regulation within crypto, which, you know, will will rear its head at some point. But lots of lots of legal cases, a lot of news continuing to come out on, you know, the impact of, more and more dollars flowing into these ETFs. Right. And then, obviously, just like you said, things like stable coins will rear their head from time to time and, and dominate the headlines like they did this past week.
Robert Swarthout:Absolutely. Well, appreciate you taking the time, and, if anyone wants to join us, or catch us on podcast, you can subscribe in your podcast player. Just search for Teton Crypto Capital or the weekly crypto check-in. Until next time, Andres. Take care.
Andres Sandate:Good to see you, Robert.