Subscribe
Share
Share
Embed
Topics covered in this week's episode:
- Robinhood buys Bitstamp
- Bitcoin ETFs back to getting inflows
- Fifth Circuit vacated SEC’s private funds rule
- Franklin Templeton eyes new tokens
- Tokenization is discussed in the Financial Services Committee
- Ripple closes transaction to buy Standard Custody
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 June 12, 2024. I'm your host, Robert, and I'm enjoying my cohost, Andres Adate. How's it going, Andres? Good, Robert. Good to see you.
Andres Sandate:Getting close to the middle of June and
Robert Swarthout:Yep. Hope, hope you're well. I'm well. I, you know, my wife does horse stuff, so I've been doing my chores that I or the stuff not horse chores, but other horse stuff that I wanna do in the morning. So it's getting warm here.
Robert Swarthout:It's gonna be crazy hot this weekend here in Atlanta, so upper nineties. And, I don't know what the humidity is gonna be like, but I I will be trying to stay inside to not figure it out. So I I know you do baseball with your kids, so are you gonna be able to decide all weekend?
Andres Sandate:Yeah. We actually are off this weekend. We we have a rare weekend off because we are starting district baseball Monday. So we'll, I'm sure we'll be outside practicing, but hopefully, it's in the mornings.
Robert Swarthout:Maybe, like, 3 PM, maybe practice?
Andres Sandate:Yeah. After after 5 games last weekend, between Saturday and Sunday, we've we certainly felt the heat and humidity. And, yeah, we, yeah, the the crypto industry. Speaking of heat, Robin Robinhood turned up the heat on the crypto side and made an acquisition.
Robert Swarthout:Yeah. They, they announced that they're buying Bitstamp. So Bitstamp for those that are, I guess, newer to the space is a one of the oldest exchanges that's still around from back in the day. They admittedly, I believe, launched technically around or before Coinbase did. I don't know the exact dates, but I know that they've been around for a very long time.
Robert Swarthout:It was the first exchange that I ever bought anything on back in 2018. And, you know, back back then you couldn't just send money to a Bitstamp US bank account. You had to wire funds to a European bank account. So things have changed a little bit, but this is a, I I think this news is really good for the the Robinhood customer, potentially good for the bits stamp customer, good for the industry because it's just, you know, kind of all boats, you know, the tides raising all boats here type situation. You might see more of this happening too.
Robert Swarthout:I don't know if you're gonna see Schwab or someone else go after a crypto exchange. Just really there's not many options, and then Schwab is trying to build their own thing on on the side. But it's a, I think the only, group that this is not good for are the last round of investors that invested in Bitstamp at a $400,000,000 valuation. Because this sold at a 200. So it's a, you know, potentially not a great day for them and, you know, m and a activity is probably pretty pretty weak right now, be my guess.
Robert Swarthout:So it's Yeah.
Andres Sandate:Yeah. So so they, so they probably they had the position marked at 400. The transaction reportedly is for 200,000,000 in cash. Right. And the well, let's see.
Andres Sandate:I'm reading that the crypto platform has 85 tradable assets, and, Bitstamp also offers staking and lending products, which, you know, as Robinhood responded in, the media said it's gonna enhance the offering, because you gotta believe that, you know, Robinhood as a fairly new public company is going to be valued based on a lot of metrics, including customer churn, customer acquisition, etcetera. Yeah.
Robert Swarthout:You know, and, again, Robinhood did a little bit of crypto. They had 4 or 5 different tokens that you could purchase, and their audience certainly skews to the younger side, which is, you know, crypto more crypto pro than you might see at some of these other places. So, you know, cool news, and, you know, it's a, I guess, another positive for the crypto industry to kinda keep getting elevated is, I guess, my emphasis on this one. So Well,
Andres Sandate:I have a Robinhood account. I opened 1, several years ago just somewhat out of curiosity, so I wanted to see Yeah. The the gamification aspects that you heard reported, and it it really is a lot more intuitive from the standpoint of just the user experience. And I'll be I'll be able to report back in a, you know, a few months to see, from a crypto perspective because it's pretty limited what you could do before on the crypto front.
Robert Swarthout:Are you required to buy GameStop shares when you open their Robinhood app?
Andres Sandate:No. But apparently, you soon after the Apple developer conference yesterday, soon you'll be able to ask chat gbt which crypto should I buy probably on my iPhone within the Robinhood app.
Robert Swarthout:Yeah. Yes. There you go. There you go.
Andres Sandate:There's so many there's so much cross cross, licensing with all this stuff. I mean, I can only imagine, like, the agreements that you're signing and clicking through and you, you get these updates on your phone nowadays. It's just it's mind numbing. Yep. Everybody has your data.
Andres Sandate:Just that's the bottom line.
Robert Swarthout:That's that's what everyone needs to remember, when they're signing up or doing stuff that, you know, you likely are the products, not the customer. So, our next thing is, I guess back jumping back on the Bitcoin ETF train a little bit here. You know, there was certainly a period for a couple weeks there where there was, not much inflows or net inflows. There was certainly some outflows happening. You know, it's a bit of a breather, I would say, as and it obviously mirrored what the crypto market was doing as a whole.
Robert Swarthout:And so over the course of April into May, that kinda happened. And then you, start to see some inflows and some big inflows. There was a $500,000,000 net inflow for the whole group last, Wednesday into Thursday, and it follows almost $1,000,000,000 on that previous Tuesday. So it's cool to kinda see it checking along. You know, what this thing will be at the end of the year, you know, will be interesting to see.
Robert Swarthout:So
Andres Sandate:Yeah. Well, it's over 15,000,000,000 now in net inflows since January, 1st, I believe.
Robert Swarthout:January 15th, I guess, when
Andres Sandate:it was. Like, in mid January. So and 17th consecutive day of net inflows for for the funds, which is the longest streak since kind of, like, the 1st month, late January into kind of the 3rd week of February.
Robert Swarthout:So Yep. Yep. So, yep. Just, and and also so it's not just the American ETFs that are, you know, gonna start driving the price potentially. It's the Australian ones.
Robert Swarthout:There's, I think one coming in Singapore if I'm not mistaken. So, you know, it's slowly gonna have pressure function around the clock versus just US equity hours. So
Andres Sandate:Yeah. And Fidelity Fidelity and BlackRock continue to lead the pack, you know, in terms of which two products are getting the the lion's share. I think, this week, Fidelity added 221,000,000 on one day, and, BlackRock's, Ibid added a 155,000,000. So the vast majority of the dollars are still going to those 2.
Robert Swarthout:Yep. Should we, have a public, bet here when we see the first closing of one of these things? The ones that
Andres Sandate:Yeah. Yeah. I gotta think they're gonna give it through at least the end of the year before the basically
Robert Swarthout:a whole
Andres Sandate:year. Yeah. Yeah. I think so. I I don't know if that's yeah.
Andres Sandate:There's a lot of math that goes on with these these registered products because, you know, they're until they hit a certain number, the issuer, in the case of, you know, pick the issuer, they're having to pay for a lot of costs associated with operating the ETF, you know, not just, setting it up, but also the ongoing regulatory filings, trading, compliance, operations, accounting, board meetings. So there's all sorts of costs, that go into that, to that product. And at a certain point, you know, that becomes just an it's it's just not worth it. Right? You don't have enough net flows generating revenue, to keep keep the product open.
Andres Sandate:I do though have to think that a lot of these sponsors think there's there's another leg up on crypto prices, and none of them wanna miss out on that. So
Robert Swarthout:Yeah. That's fair. You know, if you overlay the crypto cycle on top of just this general ETF news, it could be even at small volumes, it could be a little advantageous for them.
Andres Sandate:I think it's 2025 before we see the first one. What about you? Yeah.
Robert Swarthout:I was gonna say q one as well. Just kinda like maybe q 2, you you kinda get through the cycle. I think I didn't say think of it that in that light initially, but it's, I I could buy into that. So you know, and I haven't looked to see what the long tail is on although the lower end of some of these ETFs, but, like, the ones that are say 8th and 9th or 7th and 8th, 9th place, Like, what's their AUM? Because I know that some platforms won't even add it till it's a 100,000,000.
Robert Swarthout:And I would assume that they're all probably closer above that, but, you know, I guess I should, do my homework there. Our third thing here is, the 5th circuit vacated the SEC's private funds rule. This was, not exactly crypto focused immediately, but this, you know, to me just shows the overreach we see in the market with the SEC is also happening in other portions of the market. And, you know, I I appreciate the, the courts continuing to do their job to keep the SEC, what I believe, in line or to attempt to keep them in line. So this was, this this, I think, came out of the blue too.
Robert Swarthout:I don't think many people expected this to happen. So
Andres Sandate:Yeah. As I sit on a a a trade association, the Southeastern Alternative Funds Association, I run that board, and we were preparing to do an event to update all of our manager members on the 5th Circuit's ruling. And we were gonna do the event in the Q1. The ruling didn't happen. We delayed it.
Andres Sandate:We delayed it. Now we've got a ruling, so now we're gonna do an event. But, effectively, you know, if if I I guess if we summarize, it was gonna be a pretty substantial change for private fund advisors. So the advisor registered with the SEC who oversees or advises a private fund was gonna have a lot more, reporting requirements and was gonna have a higher regulatory kinda hurdle, or burden if you Right. Listen to the the lawyer's side of things for the for the funds industry.
Andres Sandate:And more more disclosure, around fees and expenses. There was gonna be some limits on secondary transactions or stricter provisions. Mhmm. And there was a lot of trade pressure, applied from various parties, and it'll be interesting to see, if there's a rehearing, by the full 5th Circuit or maybe appeal of the decision. I don't think we've heard the end of it.
Robert Swarthout:Yeah. You know, if this SEC's taught me anything is they're never gonna stop fighting. So they'll find another way to fight it. It'd be my guess. Yeah.
Andres Sandate:Or they're just gonna try to apply in their enforcement or their examinations, more importantly.
Robert Swarthout:Uh-huh.
Andres Sandate:They're gonna use the examination process as a way to test these rules at which time if they come up with, a lot of let's just say they do a bunch of examinations across 24, 25 around these very topics, then they would have, you know, basis to go back and say, see, we told you this was happening. So yeah. Yeah. One way or the other, I would expect, yes, the SEC is not done.
Robert Swarthout:Yeah. So the next topic here is, Franklin Templeton is eyeing new tokens. So this doesn't necessarily mean that they're launching their own token. Currently, they are only, you know, they only offer Bitcoin and Ethereum type products. And, you know, from the stuff that I read, it looks like they're opening it up to some other higher ranked market cap coins, that kinda gives some diversity.
Robert Swarthout:You know, this is the first time I've seen one of these big players immediately, like, mentioned that they're doing this. It it makes sense that they're doing it. It was gonna happen for everybody, but to kinda see it happening, and starting to become news, is, pretty cool. You know,
Andres Sandate:it's part of that training process. Yeah. So Franklin Templeton, I always think about them as an issuer. Like, they have mutual funds or they may they sponsor various products. Yeah.
Andres Sandate:Tell me more about kinda what what that means in terms of they're going to offer to their clients or to customers?
Robert Swarthout:So they have my understanding is, so they have a couple they actually have 3 different things that are kind of well, 2 of them are blockchain, one is kind of like blockchain. So they have that tokenized, treasury fund. They've been doing it for a while. Okay. Yeah.
Robert Swarthout:So they have that they have, I believe, some tokenized Bitcoin and Ethereum. I don't know if they're ETFs. I think they're probably trust type product. I don't know if these other things will be trust, because obviously, they're they're not in the ETF game at all when it comes to crypto.
Andres Sandate:Right.
Robert Swarthout:So it's you know, my guess is more of the trust or, you know, private placement type situation stuff. So
Andres Sandate:Well, it, you know, it it is another big traditional asset manager that's been in the industry for a long time, has a lot of relationships in Mhmm. The financial planning, advising, wealth management channel, you know, big in retirements, retirement account business. So, from the from the standpoint of when you see a big asset manager like this moving into or at least exploring moving into digital asset crypto territory in a bigger way. That should be a a a positive sign, if you will, if you're, you know, if if you're into crypto, which we are at Yeah. You know, Teton.
Robert Swarthout:For sure. So our next topic, tokenization is discussed in the financial services committee, and I probably need to add a little bit more detail to this particular bullet point. So there's subcommittees within that committee. This is the digital asset subcommittee of the financial services committee. So not full committee, but, you know, where a lot of this crypto stuff that's coming out of the financial services is coming from.
Robert Swarthout:They had a hearing titled the next generation infrastructure, how tokenization of real world assets will facilitate efficient markets. It is coming. It is not a matter of if, it's a win. Immediately, some of this stuff's gonna take longer than we would probably like, and we will be surprised about some other stuff being happening sooner. But it's, cool to see congress actually even even in the subcommittee like this, talking about the use of this technology more than, like, all the, you know, what happened that's bad in crypto, you know.
Robert Swarthout:They they are actually trying to find some positives and, real world use cases, which is gold. So tokenization, obviously, a hot topic this year. It continues to be. And even in the quiet part of the summer, especially in congress, they are talking about They're working. Yeah.
Robert Swarthout:They're actually working. Yes.
Andres Sandate:Yeah. They're actually doing their job. I like that. Yeah.
Robert Swarthout:But they're about to They're probably due for another break, though.
Andres Sandate:Well, I was gonna ask you if you knew who they had speak. Because a lot of times at these hearings, there's a discussion and and often that is code word for they bring in somebody from the industry or multiple parties to sort of be grilled by members of that committee.
Robert Swarthout:See any names. Yeah. It's I did not see any names, unfortunately. Okay. It seemed like it was a it wasn't combative.
Robert Swarthout:From everything that I read, it was a positive session. It wasn't like, hey. Here, I gotta grill this person and rake him over the course of calls because some of the industry did something wrong.
Andres Sandate:Right. Yeah. No. It it is exciting to see that tokenization, is is grabbing hold and is getting discussed around, Capitol Hill because as we all know, we're we're we're all in you know, from a crypto standpoint, those bullish on the industry and the technology, are, you know, are are keen to see more legislative clarity and, and more rules pass because we're a country with the rule of law. Right?
Andres Sandate:So people, especially in the financial markets, right, want
Robert Swarthout:Correct.
Andres Sandate:Want want clarity. They they want to understand, okay. Are we talking about securities law here or are we not? And, certainly in this space, it's it's been a topic each week. So glad to see that they are embracing it.
Robert Swarthout:Yes. So our last bullet point here is, Ripple closes a transaction to buy standard custody. So this one actually is I find fascinating because I don't think that standard custody was exactly for sale. I think what happened here. So standard custody is a business that is focused on institutions and, whether it's government or enterprise, customers to help them custody crypto as their name says.
Robert Swarthout:Standard custody. They, you know, very much a non retail focused business. They, were owned by a company called PolySign, which was a startup. And, you know, they've been going along. Polysign also had ran into some financial, issues late last year, early this year.
Robert Swarthout:And basically, it sounds like an investor in Polysign, I wouldn't say called their debt due or something something along those lines, And, all of a sudden, Polysign was in a tight spot. Ripple being in the, I guess, the the financial strength position that they're in, already focused on enterprise customers, not having a true custody product that fit that part of the market, saw an opportunity here and bought standard custody. What is to be seen is what this means for PolySign. Is this mean there's an empty corpse laying around? Or, what exactly happened here?
Robert Swarthout:But I I think that the net net here is is standard custody is gonna thrive within Ripple, be my guess. There's the CEO of standard custody came over as part of this transaction, staying on the Ripple team. That standard custody team will be, I guess morphed into, the Ripple's team that's building the CBDC, and they will, you know, kind of, I guess, bundle all that together effectively. Mhmm. So it's a
Andres Sandate:Consolidation play.
Robert Swarthout:Yeah. Consolidation, you know, I would say a bit opportunistic on Ripple's part, be my guess. And, you know, I mean, last time I saw, Ripple had over almost $2,000,000,000 on their balance sheet, so they didn't pay any close to that for this. I don't think it's been disclosed, but my guess is is less than a $100,000,000. Mhmm.
Robert Swarthout:So we, you know, it so custody is important in all cases, but custody is very important when it comes to enterprise customers, government customers. They're not using these smart wallets and all the other things that retail customers might use. So there's a lot of rules applied. So Yeah.
Andres Sandate:I mean, you have to think if you're dealing with, like, corporate treasury assets. Right? Cash, you know, short term short term funds, that company companies, enterprises, governments are relying upon for funding that, you know, whether they're using the Federal Reserve or they're using other, large enterprise customer solutions, you know, Northern Trust, you know, the the the the the Bank of New York Melons of the world. If Ripple wants to play, and I've always heard you talk about this, you know, in in that large enterprise market, there's just a different there's a different architecture, right, than than what you're talking about when it comes to the retail customer to take nothing away from Right. You know, some of the some of the needs that retail customers have because they've been burned, you know, quite bad in crypto.
Andres Sandate:And I think there's a lot better solutions out there, but, certainly, when you're talking about government funds and enterprise customers, it gets into a realm where things like security, settlement, all that type of stuff has gotta be incredibly, incredibly buttoned up.
Robert Swarthout:Yeah. You know, and, admittedly, you may find that there's a corporate customer using standard custody that provides a service to retail. So retail may end up touching standard custody's products without actually knowing it. And, you know, there's a, so standard custody happens, and then the another big player in this space is Fireblocks. They're partially backed and funded by the Bank of New York Mellon.
Robert Swarthout:There's always been this kind of this whisper rumor for a long time that BNY, once they kinda get the, I guess, regulations and stuff in place in Washington be, it sounds like that's an obvious buyer of Fireblocks, BNY being the oldest custodian in the country and biggest for that matter. So, you know, time will tell if that one plays out, but it's, certainly seems like that one might be teed up at some point.
Andres Sandate:So Yeah. I I have to think that there's gonna be a a a lot more m and a once we see regulatory clarity. Right? Because you're seeing that in asset management. I mean, if you just step back and look at what's happened there, if you are looking for where growth is happening and you're an asset management, it's happening in, excuse me, areas like alternative asset management, specifically private equity, private credit, infrastructure.
Andres Sandate:And so you're seeing a lot of these traditional asset managers, say to themselves, well, my traditional asset management business, whether it's ETFs, mutual funds, it's not creating the same type of margins. The distribution of those products has gotten harder and harder as more indexing has happened. So what are they turning to as a source of growth? They're turning to alternatives. They're turning to acquiring, building, partnering.
Andres Sandate:I gotta think the same thing happens in crypto, blockchain, digital assets once we see regulation. Traditional finance, TradFi says, where's the growth? It's gonna be in crypto. It's gonna be in digital assets and blockchain. And are we gonna go build all this stuff, or are we just gonna go give them a bunch of money?
Andres Sandate:And and, you know, now the integration of those cultures and the integrations of the the people and technology Mhmm. Is it like bank mergers where it typically is slow and doesn't result in much, benefit to the customer, or is it create, you know, 5 or 6 or 7 giant firms, you know, where everything is highly centralized again? It's, it's been fascinating to watch.
Robert Swarthout:Well, we, I guess we'll have a front row for it. So Yeah. 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 weekly crypto check-in.
Robert Swarthout:Take care. All the best.