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Topics covered in this episode:
- SEC v Ripple Final Judgement
- CFTC $12.7B judgement against FTX
- 99.5% of BTC ETF AUM hung through the craziness last week
- UBS soon to follow Morgan Stanley
- Bitcoin ETF options coming soon?
- BlackRock sees $IBIT for 2024 at $40B?!
- SEC drops investigation into $BUSD after 15 months
- Operation Choke Point 2.0 still in effect
- Kamala would continue crypto crackdown
- Kamala takes lead over Trump on Polymarket
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 August 14, 2024. I'm My host is Robert Sorthout, and I'm joined by my cohost, Andres Sedate. How's it going, Andres?
Andres Sandate:Hey, Robert. Mid August. It's to believe. I The month is is just moving quickly. And, man, do we have a lot of headlines this week?
Robert Swarthout:Yeah. Like I was saying before we got going here, I started to collect the headlines over the last week that I have found interesting, and, oh my gosh, I have a lot of bullet points. So we have a lot of words to say, apparently. Yes. So
Andres Sandate:And and it wouldn't be yeah. I was gonna say it wouldn't be a check-in unless, you know, we had some updates on the SEC, what's going on with XRP and Ripple. So, yeah, let's dive in.
Robert Swarthout:Yeah. So, I guess, in the spirit of giving updates here, this might be one of the final updates, that we get to do about this. So last literally, like, 45 minutes after we finished recording last week, the judge issued her final judgment order. And, you know, for all intents and purposes, it appears to be another big win for, Ripple. You know, I'm sure they were much more hoping to have their suggested penalty of $10,000,000 be what the judge granted versus the 2,000,000,000 effectively the SSC wanted.
Robert Swarthout:But the judge came back with with the total number being a 125,000,000, but it breaks down as $0 in the disgorgement, and that was expected because the SCC could show there was no losses to investors that had bought XRP from Merkel. There's a $125,000,000 civil penalty for securities violations with regards to the sales. And, and then a very boilerplate from my understanding injunction was put in there about, you know, if further breaking section 5 of the Securities Act. If they did, they'd be even more trouble. But from, you know, I'm not an attorney, but from everything that I read from attorneys, it's been, like, we always put something basic in there.
Robert Swarthout:If it was more had more teeth to it or it was more extensive, then maybe something else to consider there, but this is very, plain Jane.
Andres Sandate:So Yeah. And and and in any other world, a company paying a $150,000,000 judgment to a regulator, they would probably not be, you know, jumping up and down in the boardroom. I'm thinking at at at Ripple, they, probably spent, you know, less than a minute thinking about the amount, but then doing the math and saying it's, you know, a win for us. Let's move on. And like you said to me this week, like, the SEC probably, you know, is, continues to be frustrated.
Andres Sandate:You know? They're Mhmm. They're taking this, you know, enforcement by suing everyone approach, and, you know, I think once again, got a got a fraction of, obviously, what they would have liked to have gotten when you look at the headline.
Robert Swarthout:Yeah. They yeah. I guess the math works out such a way that they they got 6% of what they asked for. In some ways, that should be an embarrassment, you would think, that they didn't more accurately predict what the court would or would issue. But in this case, it's been very much political and emotional, not necessarily so so much logic in it.
Robert Swarthout:So Yeah. You know, we are, really what the last little bits of this case that we could end up talking about is the SCC or Ripple has 60 days to choose to appeal, 60 or 30. I forget what it is. But, that clock's ticking as of last Thursday, preceding last Wednesday, and it doesn't well, on almost all certainty, Ripple's not appealing, from everything that I've read and watched videos of. And even the SEC doesn't appear to be too much inclined, it sounds like, to do an appeal.
Robert Swarthout:This is one of the biggest, penalties that they've ever received from any sort of, case they brought. So it is a win in that sense. But the, you know, I think it was a Fox News, journalist reached out the SEC and they, you know, they they said the words that they needed to say, but they also made it seem like this was maybe over with, which would be a relief. I mean, we're goodness. December would have been 4 years that this would have been going on, so just 3 3 quarters effectively.
Andres Sandate:Yeah.
Robert Swarthout:But, yeah, I'm I'm I'm excited that it's over, you know, it seems like the black cloud that's hanging over ripple in the XRP market maybe, you know, starting to to move away. And, you know, now that we're have that taken care of and potentially going in a bull market, it could be it could be a positive thing for XRP in this cycle.
Andres Sandate:So Yeah. It certainly could be a catalyst that, unlocks a lot more enterprise adoption and projects that might have been pent up and, stuck. Otherwise, like, can move forward now that there's more clarity. So, we gotta hustle, though, because we can't get through all these headlines if, if we take 4 and a half minutes on each one.
Robert Swarthout:So Right. Yeah.
Andres Sandate:CFTC, almost a $13,000,000,000 judgment against FTX. Robert, this is a big win for is it fair to say, like, it's a big win for FTX customers? Creditors.
Robert Swarthout:Yeah. Uber customers slash creditors. Yeah.
Andres Sandate:Yeah. So of probably bought, right, by, folks. I know that that's not been without controversy, but give us the update. What's the deadline really mean?
Robert Swarthout:Yeah. So the 12.7 1,000,000,000 is all gonna be go back to previous customers. The CFTC is not taking any as a penalty. So it breaks down as 8,700,000,000 in restitution, so giving funds back, and an additional 4,000,000,000 in the disgorgement, which, goodness, that's almost 50% more than the, number that they're receiving. So, you know, the it's been going on almost November would be 2 years since all that happened.
Robert Swarthout:And, you know, you would think that as when they had some funds tied up, they'd have lost money. You know, admittedly, all you missed out on was a bear market. In some sense, you may maybe it didn't save you some money because you were able to, get out or not be able to get out and do something else with it. But at the end of the day, it's, it seems like a big win, like you mentioned. So.
Andres Sandate:Yeah. Well, the the the other thing that I think is a win is for just the overall crypto ecosystem, crypto market. You know, to say that we've had a period of volatility would be an understatement, especially if you're focused on, like, what's happening sort of on a a intramont basis. Yep. But almost a 100% of the Bitcoin ETF Capital or AUM, assets under management, has has held on.
Andres Sandate:Right?
Robert Swarthout:Yeah. Yeah. It was so this particular number was from Monday of last week when the world was ending for everybody. Right. At least it was a sentiment to, the end of Friday.
Robert Swarthout:And, yeah, only 5% moved, which is admittedly a rounding error. Sure. It was, I was surprised, but you, you know, you can't say that everybody's a long term investor, but it kinda speaks to that a little bit here. So we will see how it how it happens. I think the real test is gonna be you see a run up and say the market you know, say the price of Bitcoin doubles over the course of what the basis is for most of these investors, like, what happens then?
Robert Swarthout:Do you start seeing some profit taking, or do you people are really the, like, they bought in, they're the long term multiyear type investor. So
Andres Sandate:Yeah. Well, I guess Well, in those targets
Robert Swarthout:end of the year.
Andres Sandate:Yeah. I was gonna say, you know, with the volatility that you see in this asset class, you know, we we said before the show, like, where do we think Bitcoin is in 3 months, 4 months, towards the end of the year? There's so many things happening in the world. We have, obviously, a gigantic election here in the US. We're gonna get to that here later.
Andres Sandate:But I think it's interesting to think about these bigger institutions where they have a target allocation. You know, when you own real estate or you own private equity, like, you don't get these swings in valuation. So a small percentage from one of these investors, all of a sudden, a 1 or 2% allocation can can get really big in a portfolio. So it's, it's gonna be fascinating to see how, you know, groups rebalance and think about taking profits or or not, given if we are in a bull market or getting ready to see a run up, like, what happens. So
Robert Swarthout:Yeah. You know, and and admittedly, part of the whole, like, rebalancing topic is interesting because, you know, if you have a run up like that, like, what are you gonna do the funds? You're just gonna go buy something else that is not nearly as risky, risk on as that? Like, it just seems like you're kinda changing the mix of the portfolio at that point too, not just rebalancing. So I don't know.
Robert Swarthout:It, I'm sure we'll hear more opinions about that come the end of the year, be my guess. So
Andres Sandate:That's right. Well, we have another of the wirehouses, UBS in this case, that is expected to follow, you know, Morgan Stanley into, into crypto and approve, is it the Bitcoin ETF?
Robert Swarthout:Yeah. It looks like it's gonna be, IBIT, f Mhmm. BTC, so the Fidelity, and bit b potentially is a third option.
Andres Sandate:Mhmm.
Robert Swarthout:What whatever ends up being, you know, at the end of the day, it's demand for Bitcoin at at at core. And, you know, there's some quotes from a source, you know, so sources are what they are these days, but best case is August, worst case is October, and, client demand is more than the firm expected. You know, this could also be a little bit CYA by trying to make it seem very positive, but, because they don't have it yet. I you know, trying to kind of manage client expectations and feelings. But, you know, whether it's Wells Fargo next or UBS, one of the 2 will be the next of the 2 biggest to come in, and then, you know, all the other independents and everyone else that's probably already starting to work on it is, soon to follow.
Andres Sandate:Yeah. Well, you know, interestingly, like, UBS being Swiss, Europe further ahead than the US when it comes to regulation, and we've talked a lot about Mika and some of the other moves that Europe has made as far as a block in terms of, crypto regulation and sort of crypto acceptance. I'm curious within UBS, and it'd be hard to find this out, but, you know, it's clientele in Asia, Europe versus, say, North America or the US. Like, where is that initial adoption the greatest? Right?
Andres Sandate:Because I think the numbers show that in Asia and in Europe, like, retail or individual investors, taking out, like, younger investors in the US, like Gen Z tend to be more likely to own crypto or digital assets than, say, your everyday, like, you know, American. But Yeah. Lot lot of that could change. A lot of that could change.
Robert Swarthout:Yep. Absolutely. So our next topic is kind of following on in Bitcoin ETF news is Bitcoin options. And it for a while, it sounded like that wasn't on the horizon, but there was some updates, I think it was late Thursday or Friday, about how the applications have been, to have been submitted to apply for these, ETF options. All of a sudden started getting withdrawn and new applications kinda, I guess, revised effectively.
Robert Swarthout:They quick burst of them, like, 2 or 3 different applicants. So maybe that's coming. This is kinda more flushing out the market and just giving, you know, investors, admittedly more sophisticated investors in this case, more options. Pun not intended there. So
Andres Sandate:Right. Well, you know, one of the more interesting, roles right now in, let's call it, the crypto legal world has to be being kind of on the front lines, as counsel for these bigger asset management, firms when it comes to the product design, development, all the legal back and forth in terms of amending filings, because I think we're just at the very beginning of what what looks to be kind of an explosion, if you will, in, like, registered offerings with with, like, underlying crypto construction or collateral. So it it's just fascinating to to watch. And I think, you know, like ETF and index, we've seen so much innovation there. You can just just about get any type of exposure now that you want thematically, sector, market cap.
Andres Sandate:So if if that same thing applies to crypto, it's gonna take a while. Mhmm. But you could imagine over the next decade or 2 the amount of innovation that we could see.
Robert Swarthout:Absolutely. Yep. So moving on, the BlackRock's I forget which executive it was, but was, was quoted as saying by the end of 2024, they think the total AUM inflows, for the ETFs would be 40,000,000,000. We're currently at 19,000,000,000. So we have, call it, 5 months left in the year, and I think it's gonna roughly more than double.
Robert Swarthout:They said even best case could be 50. Demand hasn't peaked. It's just, you know, admittedly, I think part of that comes from some of price appreciation in Bitcoin. That could be a huge chunk of it for that matter. And then you have, you know, just general inflows from warehouses and everyone else kinda coming online.
Robert Swarthout:So it just got that number caught me off guard. Like, it's just a huge number. To think that a year a year into this, you're already at that kind of, size would be pretty incredible.
Andres Sandate:Yeah. It's it's like a Christmas come early for people in if it if it if it actually does get that number. I know that all the projections have been, like, wildly exceeded in terms of, I think, even
Robert Swarthout:Mhmm.
Andres Sandate:The firms that have launched the ETFs, you know, Fidelity, BlackRock. Like, I'm maybe internal, there's, like, some there was some secret, you know, bulk case of where crypto would be, but I think everybody would probably if they were just honest, would say this has exceeded their expectations in terms of Mhmm. What what the asset class would do in the in the initial, you know, initial, offering, you know, period of a year or 2. So now the question is, is it sustainable? Who are these you know?
Andres Sandate:Because the early adopters are in. Now the question is to to the giant middle, right, does how big is that? How big is that giant middle market?
Robert Swarthout:Right. And, you know, whether it's the it's the client making that decision or the client just okaying their adviser after the adviser asked for a 1%, 2% allocation, It doesn't take many 1,000,000 or 1,000,000,000 of dollars to incredibly move this market, because it you know, it's a roughly I didn't even bother to look recently, probably shy of $2,000,000,000 market, and it's a again, doesn't take many dollars to really start affecting that. So
Andres Sandate:Trillion. It'll be it'll be entertaining. $1,000,000,000,000 market. Yeah.
Robert Swarthout:2,000,000,000,000. Yes. And I could I should look this up real quick. Yeah. It is a, 2 I'll see.
Robert Swarthout:Where are we at here? Market cap is 2.09 trillion today. Right
Andres Sandate:at 2. Yeah. Yeah.
Robert Swarthout:Yep.
Andres Sandate:Well, obviously, we're gonna have to give updates on multiple of these headlines as we march toward, you know, the end of the year because a lot of this stuff is, these are big numbers and and a lot of implications. We'll be talking about a lot if we're at 40,000,000,000, let's call it, in December.
Robert Swarthout:Absolutely. Absolutely. So moving on here. This one is just a head shaker. This is a head job, in my opinion.
Robert Swarthout:So the SEC had filed a lawsuit against Binance in November of last year, and part of it was the money laundering and all the bad stuff that was happening, but they also claimed that, the Binance USD, was a security. Well, it's it's a stable coin backed by dollars and different things. The SEC, as of last week, dropped that investigation saying, no problem here. We don't we don't think there's a problem. What I find to be the problem is they had, $16,000,000,000 locked up in the Stablecoin being used.
Robert Swarthout:And, basically, they made Paxos the issuer of it for Binance to basically stop issuing and only redeem, And now it's down to 70,000,000. They basically just killed that line of business for Binance, and it's just an you know, just probably what our 50th example of the SCC gone wild. But it's a it's it's sad, to think that this is this can happen.
Andres Sandate:Yeah. Do you I know you probably have a a pretty informed view, because we've seen this time and time again. Did if you look at this situation, it it felt like Binance was dealt its punishment, and then you have this line of business. And is it fair to say that they just wanted to sort of force them out of this business and then drop the case? Or did you do you think that they really felt there was a case all along?
Andres Sandate:Because you had all these redemptions over the course of how I mean, 16,000,000,000 down to 70,000,000 didn't happen in a week or a month. I mean, it happened over a period of time. Right?
Robert Swarthout:Right. And I would I would imagine it was pretty front loaded. I haven't looked at the graph, but that would be my guess. Yeah. I I think that it's a I I don't know.
Robert Swarthout:The it was a line of business that worked. Of all the things that the government could be grumpy about, like, having that stable coin, they didn't go after Tether. Like, you could kind of, in some ways, make parallels between those 2. Let's say USDT is Tether. I it just seemed like they were trying to add pressure and leverage against, finance, and this is probably one of the ways they did it.
Robert Swarthout:And maybe all along they knew they were gonna drop the case. I don't know. You only can speculate there. But
Andres Sandate:It's almost like they were toying with them, though, because it's like when when you pass this when when you basically impose this fine and you tell cz, like, this is your punishment, like, I'm sure they could have also just added in, like, you need to wind this business up, and you have a year to do it. Right. But, like, when they get it the whole lawsuit and then dragging it out and then to, like, drop it. You know? I don't know.
Andres Sandate:It just Yeah.
Robert Swarthout:I I would, offer up the entire body of evidence. The FTC has done nothing respectful for the last 4 years, and that would be a respectful way to handle that situation. So may may maybe they're, handling it the way that they told everyone effectively that they would handle things. So Yeah. So kind of and I guess the spirit of other negative news
Andres Sandate:We gotta keep it positive. We gotta keep it positive. There's a lot of good things happening in crypto, but Yes. We gotta talk choke point 2.0. It's back in the news.
Robert Swarthout:Yeah. So for for a large part, people thought this was over with and kinda, like, no longer happening, which is not the case. It looks like, it's it's still going on. And the the most recent example was they basically made, customers bank, which is, I think, the the public name. There's another name underneath it effectively, do all these things, and they came down real hard on them, and basically, caused their them to debank a bunch of their, crypto customers that weren't even necessarily doing crypto.
Robert Swarthout:They were just crypto businesses doing business in crypto. Long story short, it's just more the same. I mean, like, admittedly, it's it's disappointing. I thought that we were past this phase. And, I guess it kinda ties into the next point there, and we can kinda talk about them both together.
Robert Swarthout:But Kamala, you know, doesn't she hasn't shared tons of her platform or any in my opinion so far. But if you tie it back to what she would do, she's starting to put, sounds like, people together, advisors and stuff. And a lot of the advisors she's getting that would be in the areas that crypto would care about are much of the same, if not the same characters that we've experienced for 4 years. And, we have a little bitty, chart of, the different names. It looks like a bunch of bug shots, and what what different parts of the government they're in and, you know, different organizations.
Robert Swarthout:It's just like The Like, I I was hoping that I would never see these names again. And, you know, if Trump wins, we will not see these names again. You can be rest assured of that. So
Andres Sandate:Well, let's let's back up a second and talk about choke point 2.0. So for for those folks that haven't ever heard that term or what that program is. Choke point 2.0 was effectively like it sounds Mhmm. A program that was put in place to effectively put guardrails, regulations, rules, and really stranglehold around crypto. With a lot of different agencies and government, parts of government involved.
Andres Sandate:Correct. Let me let me ask you first. This is the analysis part of our of our weekly crypto checking. Did anything out of choke point 2.0 did was there anything positive that came out of it since its inception from from the standpoint of crypto? Like, protection for investors or move the needle around transparency.
Andres Sandate:No?
Robert Swarthout:I I I don't remember a single piece of news over the last 2 years for that matter. Because this cut they kinda used FTX as the reason to kinda start this. And it's, you know, that that was the negative. And then, we've had this continuation of, and it's not even regulation. It's the regulators are getting to change the rules.
Robert Swarthout:You know, if you you can get it down the argument and discussion of does the regulator have the legal authority to do this? That's not what's happening right now. They're doing it. And Yeah. You do you, you just have to follow the rules as they set them or change them on you.
Robert Swarthout:So yeah. No. There's in my opinion, I don't remember a single piece of positive news. Positive well, it may be positive for the people running the program, but from the crypto industry, it's not. Yeah.
Andres Sandate:Well, I mean, amidst choke point 2.0 being rolled out, we you know, you can look at the industry and say, some of the things that have happened over the last couple of years, I think, you know, folks that are pro crypto like us would say have been positive. For example, the ETFs got approved very quickly relative to all the legal wrangling that was happening probably for years with respect to grayscale and some of the other early players. It just they happen, especially Ethereum, like, relative to how long it took Bitcoin to get approved. But you had this other kind of narrative or this other set of actions taking place in the industry around choke point 2.0 that, you know, you might look back in 5 years or 10 years and say, that sort of stunted innovation. That stunted the growth of the market, and, you know, there's always these unintended consequences.
Andres Sandate:Right?
Robert Swarthout:Absolutely. You know, and if talk about stunting growth real quick here. I was on another podcast this morning with Philip, from, Digiad Group, and we were talking Right. About all sorts of stuff, more much more less news, more about just kinda how the space is going. And I told him, I was, like, there was an inflection point, and hopefully, it's not gone forever.
Robert Swarthout:But, like, after 2021, crypto was crazy. It was DeFi summer. Everyone was talking about NFTs. That's when there was an opportunity for regulation to be put in place. And then all the developers that kinda left crypto because they got bored with it and went on to AI.
Robert Swarthout:The AI boom has been amazing. Not all positive, not all negative. But, like, will the developer kind of, wave come back? Or we'll see a migration? Because regulations are what's keeping people from, at least in the US, wanting to start crypto businesses.
Robert Swarthout:Full stop.
Andres Sandate:Yeah. Oh, I think it's I would also add it's the amount of capital available for a lot of these crypto projects. I mean, you've seen VC pull back a lot less capital, institutional capital flowing into, crypto startups. I think it's a quarter of what it was, you know Mhmm. Like, through the first, call it, 8, 9 months of the year.
Andres Sandate:So I think a a a combination of things. Right? To add to what you said, regulation or the lack thereof and clarity. Mhmm. And, you know, that impacts liquidity.
Andres Sandate:That impacts market participation. But then also just and maybe you could say it causes venture and institutional early capital for projects to pull back, IE jobs, talent. And where's that money going? It's going into AI. It's going into big data.
Andres Sandate:It's going into, you know, anything related to, right, chips and and, computing power, etcetera. So, yeah, it's gonna flow somewhere. People wanna put their money to work.
Robert Swarthout:Yep. Our kind of a bit of, I guess, tagging on the last topic. So so the whole there's a whole crypto based, betting market called Polymarket that exists. You're starting to see it pop up in news, where they kinda talk about, like, oh, this is how this race is going, that race is going. Well, in this case, we're referring to, you know, Harris versus Trump.
Robert Swarthout:And, for the vast majority of the time of this, I mean, she's only been a candidate for about a month now. But she's been behind, now she's ahead. You know, is does this betting market, is it more accurate than any sort of polls that you may see? Who knows? I guess, we'll find out come November 6th.
Robert Swarthout:But at the end of the day, it's a, it's fascinating to kinda watch. There's a lot of money tied up in this.
Andres Sandate:Yeah. So it go over half a 1000000000 at one point earlier in the week. Here's my question, Robert. I mean, should should FanDuel and DraftKings and price picks be worried and looking over their shoulder? Is poly market gonna make a move and all of a sudden people are gonna be making bets on the Chiefs, my Chiefs, when it comes to the NFL here in a in a few weeks on on poly market?
Robert Swarthout:Maybe. I you know, I don't know what the regulations are around, sports betting. I imagine there's a lot of them. Yeah. But it it would be interesting to kinda see a crypto focused one, that's I you know, I don't know what fees look like.
Robert Swarthout:I've never done sports betting, so it's not something that I have any sort of knowledge on. But it'd be fascinating to understand more how it could impact with crypto.
Andres Sandate:Yeah. I mean, I I'm thinking that it it could be a, not a terribly big leap for the crypto guys to get into sports betting. Maybe a little bit harder for the sports betting guys to go the other way in in in the crypto. I don't know. It's it's pretty fascinating.
Andres Sandate:I guess what it what it is is it's creating liquidity around the idea of, you know, your, prediction market. Right? And liquidity being, like, you can go place a bet on who you think is gonna win, and you don't even have to go to Vegas.
Robert Swarthout:Yep. Well, awesome. So 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 any podcast player by searching Teton Crypto Capital or the weekly crypto check-in. Take care.