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Topics covered in this week's episode:
- Coinbase posts Q1 revenue beat
- BlackRock leads the $47M strategic investment in Securitize
- Tokenized diamonds are now available on the XRPL via Tiamonds
- The SEC filed their reply to Ripple’s response
- On-chain data suggests a bullish reversal
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 May 8, 2024. I'm your host Robert Swartout. I'm joined by my co host Andres Sundate. How's it going, Andres?
Andres Sandate:Good. Good to see you again, Robert.
Robert Swarthout:Hope you're well. I'm doing good. Just some, lots of time in front of the computer today. So
Andres Sandate:Yeah. Definitely. What, what do you make of what's happening in the, in the crypto markets over the last week?
Robert Swarthout:You know, it's you know, I kind of alluded to it last week when we chatted, but just more of it's a bit of time of reset. You know, you you can get things done, but it's not as much so focused on the price action as as as other things that may be going on in the space to get, I guess, a breather. And it's, you know, it's certainly a healthy thing. If you look at technicals, it is something that, needs to happen from time to time to allow them to reset. And, you know, admittedly, April was a down month for the market, so the reset may be a breather that, allows kind of maybe cooler heads to prevail, and and we'll kinda get to a little bit more of the data about, how the market might be going a little bit later in the episode.
Robert Swarthout:Sure. Yeah. So we got, the first thing here is Coinbase post q one revenue beat. You know, Coinbase, it's so funny. Like, I I find it entertaining because the data is always there for this business before they get to report.
Robert Swarthout:I mean, yes, they're trying to develop other lines of business. Right? They're Yeah. Custody and all the other things. But if but Coinbase is in in like many other exchanges, their revenue comes from trading volume.
Robert Swarthout:Well, when the prices are up or the, that means more people trading, that means they're gonna have higher revenue. It's just direct correlation. So it's just, you know, when you see these articles, someone like, oh, Coinbase people. Well, yeah, you could I could have told you 2 days ago if you asked me to look at the data. If I thought they were gonna, you know, be in line or whatever.
Robert Swarthout:So it's, it's it's different than the average stock, because most people don't have that kind of access to a stock and, obviously, the quiet period and everything that goes into publicly traded companies.
Andres Sandate:Yeah. I, you know, I I thought that the headline was interesting just because they are kind of the bellwether, or one of the bellwethers as far as the space is concerned. So
Robert Swarthout:Mhmm.
Andres Sandate:I'm I'm just curious if the public ownership of companies like Coinbase and, MicroStrategy and others are how some of the institutions are thinking about the space as far as getting exposure. Or if it's through, you know, venture or if it's through, you know, trading strategies. I just thought it was worth a headline.
Robert Swarthout:Yeah. Absolutely. You know, what's interesting is, I didn't read the article, but I saw an article headline come across that, Cathy Wood and Ark Investment is selling some of their Coinbase the last couple days, $15,000,000 yesterday. And I think that was, like, their second or third day in a row of selling. So it's, you know, obviously, they have a reason for what they're doing, but it's this it's early in the cycle in my opinion.
Robert Swarthout:Obviously, not financial wise, but it's early in the cycle to be selling Coinbase. Like, if you believe that we're in a bull market cycle and, you know, we prices are going to whatever they're gonna go to, market caps can go up 2x or whatever number you wanna slap on it. It seems rather early to be selling the, the single opportunity you have in the in the equities market to be indexed to this. So we'll see.
Andres Sandate:Yeah. Yeah. I I I'd love to dig in and understand who are the analysts covering Coinbase and the you know, what the institutional ownership is of the stock. I haven't had a chance to do that, but be curious if it's the big ETFs, like, the big index ETF, providers like BlackRock and Vanguard or who institutional owners are.
Robert Swarthout:But Yeah. Yeah. I mean so on the topic institutional, it kinda leads us to our next topic of BlackRock Yeah. Leads a $47,000,000 strategic investment securitize. Do you wanna maybe give listeners a little quick recap of what you think Securitize is in 30 seconds?
Andres Sandate:Yeah. I think they're a platform for issuers and sponsors who wanna bring, offerings to the marketplace, and the marketplace could be accredited investors, qualified clients, qualified purchasers, but they're a platform that can, facilitate, is the word I would use, the creation of of tokenized offerings and other digital offerings. And so I see them as a as a platform that's going to help to bridge the TradFi space with the, investor that wants to get access to digital, versions of those offerings or tokenized versions of those offerings.
Robert Swarthout:Absolutely. You know, and it's, you know, it's it's in some ways, it's BlackRock following through on what Larry said that was gonna happen from early January. Right? When they Bitcoin's launch, he said tokenization is gonna be the thing that's coming next, and it's coming next and it's coming quickly. I what I couldn't find when I was, kind of researching, this particular point was, you know, of that 47,000,000, how much was BlackRock stake?
Robert Swarthout:I I didn't get a chance to kinda find that answer, but, you know, nonetheless, I can't I imagine that securitized company, executives are thrilled to have such a big name kind of a stamp of approval,
Andres Sandate:on on their offering or their their suite of solutions. So Yeah. It doesn't sound like BlackRock was the lead of the round. That would have been likely the headline that BlackRock led around in securitized. If if if they led the round, I would think absolutely, unequivocally that, yes, your statement is is Larry Fink is following through because he went out and led around and, you know, who knows?
Andres Sandate:Maybe they made a even an offer to acquire the company. I'd be curious. I'm sure we could find that, data out, like, who led the round.
Robert Swarthout:Well, I'm looking at the article here. It's from The Block. It literally reads, BlackRock leads $47,000,000 strategic funding. So I guess it depends on, you know, how you define leads. I guess it could go either way there.
Robert Swarthout:BlackRock is BlackRock's name may lead it or their dollars may lead it, but nonetheless, it's
Andres Sandate:Well, I mean, if they are the lead, in fact, then that that's a yeah. That is a big stamp of approval. I mean, I actually interviewed with Securitize sometime back, and they were they were looking for folks that had a background in traditional alternative investments and and specifically wanted people that could distribute their offerings to high net worth investors, family offices, RIAs, and institutions. And when you look into the company, from what I can tell, they have one offering from KKR. I believe that they've they've partnered up with KKR on an offering, and maybe this is the door opener to them doing more offerings.
Andres Sandate:I think one of the things with Securitize is, can they get issuers and sponsors of, call it, traditional alternative investment offerings? And maybe they're not limited to alternative investment offerings, but can they get those issuers and sponsors to work with them to create these, you know, block chain, tokenized, whatever, you know, whatever you wanna side characterize it, can they get them to work with them on tokenizing offerings is gonna be, to me, a really interesting data point. I'm sure that securitize can do other things, but I see them as a company that wants to to to be very active in that space.
Robert Swarthout:Yeah. And I don't know if this what I'm about to say is true, but my hunch is that so BlackRock also has the, the ticker build up build up. So it's b u I d l, that is the tokenized treasury, I believe. And I'm wondering if this they use securitize for that offering, but I have never seen something that specifically states that. So it's, you know, early days, but progress nonetheless.
Robert Swarthout:So
Andres Sandate:Yeah. Yeah. For
Robert Swarthout:sure. So on the topic of tokenization, this is just a quick little, I guess, chat on this piece, but, like, tokenized diamonds are now available via a company called Timmons with a t via the XRP Ledger. It's a, you think of it as like a digital representation, like in an NFT form, and you probably the serial number or whatever kind of marking that they have on the diamond. Some interesting use case. I can't say I saw this, is oh, I can't see this being a huge market, but this I think this is an example of what will end up being thousands of things that end up tokenized someday, and this is maybe the first kind of off ball here.
Andres Sandate:Yeah. I'm just curious. The headline does get my attention because I'm I'm I'm curious about how that happens. Like, how do they actually, I know that there's technology with respect to, minerals and diamonds and other natural resources. You know?
Andres Sandate:Theoretically, you could do this with any kind of gemstone. You could do this with any type of, valuable. Right? And so I know that the technology is far ahead of even my mind and comprehension, but I'm I'm curious, like, how they practically tokenize it. I get the technology on the back end.
Andres Sandate:But, yeah, it it's fascinating and and a sign of probably more things to come as the physical and the digital converge.
Robert Swarthout:Yeah. It's, kind of slightly off topic here, but I was driving around the area here in Atlanta yesterday and I saw a new store pop up that was for trading cards. I was, like, I, like, wanted to check the calendar and figure out what year it was. And then it got me thinking. I was, like, oh, because they also said they did video games in the same store.
Robert Swarthout:I'm like, okay. You might have a world where you can go in and buy the NFT of the card that has been verified by whatever verification agency there is, and we're probably not far away from that. Especially if you can, you know, get tokenized diamonds. So, you know, if you want to be able to show your your, I guess, your your shoebox virtual shoebox of sorts of cards you have, with your, shoebox of, virtual diamonds, maybe. So
Andres Sandate:Yeah. I you know, I'm I'm I'm I'm hoping our mutual friend, a shout out to Greg Kaufman, who is at gridline and also is the president of the Kaya chapter in Atlanta. He's actually working on an event where the topic is collectibles, sneakers Yeah. Sports cards, and other types of trading cards because they are growing, in in popularity. And it's interesting because those stores that you mentioned, there's a new one that did pop up.
Andres Sandate:The one that I'm thinking of is over off of, Cobb Parkway in 41. Okay. And the space that they took out is in a pretty prominent shopping center, meaning the rent is is is not probably cheap. And the size of the store Yes. You know, it's it's so big that this is not the mom and pop trading card shop.
Robert Swarthout:We're talking about the same one. I
Andres Sandate:saw it. Yeah. And I was like, what? Yeah. Yeah.
Andres Sandate:So my friend and his son went into that shop a month or 2 ago, and he goes, yeah. That that's for big time collectors. That's not a place where, like, a a 9 or 10 year old's taken in, like, a stack of cards, and they're, like, looking at them and saying, yeah. We'll buy these, and we want the no. This is for, like, the serious collector.
Andres Sandate:So the, they have cards in there that that go for 1,000 of dollars. And what what what I'm interested in is seeing where the trading card, business goes as you look at all these different trading cards, companies. And it used to just be limited to sports cards, but now my kids collect, you know, they collect, Pokemon and and almost you you start looking at the entertainment side of this and Marvel and what they're creating, and it's pretty fascinating to think about how big that market could get. Yeah. And there are some hardcore collectors out there is all I'll say.
Robert Swarthout:Absolutely. You know, if you're into collecting cards, the next time you're on a Delta flight, you need to ask the pilot for, a trading card. They have cards for each airframe that they fly these days and maybe get them to sign it. Something a little bit different. They're, almost hologramic, type cards, but they, one for each one.
Robert Swarthout:There's a there's a lot of different planes that they fly, so different cards. So Cool. So next topic. The SEC has filed their reply to Ripple's response with, for summary judgment, which was a rebuttal to the SEC's request for summary judgment. So we're kind of a couple layers deep here.
Robert Swarthout:You have
Andres Sandate:to say that again three times.
Robert Swarthout:Yeah. And and faster each time.
Andres Sandate:So yeah. So the s e So the SEC required
Robert Swarthout:a Ripple's response. Yes. You know, Ripple's was much longer. The SEC's was shorter. You know, at the end of the day, the SEC is, you know, on obviously, skewed to one side away from Ripple.
Robert Swarthout:And the the the burden in some sense is on the SEC at this point. They're obviously the plaintiff and the Ripple's the defendant, but the the judge has been seeing through over the course of this whole case, kind of the SEC's games. The the SEC is trying to drag in some old dirt in different things that it's just more of the same. I can't wait to not have to talk about this anymore. But the it's just it's it's it's, it's a sad state of affairs.
Robert Swarthout:I I say the same thing every time we talk about this, but it's at the end of the day, it's, it's news. I think that the one thing that was interesting about the SEC's reply was they brought up that as of April 4th, Ripple has decided that they want to offer a non registered security in a stable coin. So they're already starting to do the word games and pick the fight there, but they hadn't even finished this fight. So it's just like, it's almost like they feel like they need to fill the paper with words, and they just find some words to stick on the paper. Yeah.
Robert Swarthout:Anyways
Andres Sandate:Well, like, we talked about over the last, few months on the show, the regulatory environment, it seems this does one thing is it keeps a lot of lawyers paid very well.
Robert Swarthout:Yes.
Andres Sandate:And if this if this industry is like almost every other industry, it it does feel like a lot of times the regulatory, experts move, you know, once a big case is finished or once a big, administration change takes place, you see a lot of the folks leave the regulatory world and go over, you know, and sit on the other side of the table. And this this case and many others Mhmm. Continue to, I think, you know, slow down, I guess, is the word. Right. What what what we all in, you know, crypto and digital asset space who are fans and who are investors and are followers is progress.
Andres Sandate:And clarity, is, I think, is what we all seek. And regulatory environment here, as you've said, Robert, multiple times, that uncertainty and a lack of clarity, it's just allowing other countries to get ahead. So Yep.
Robert Swarthout:Yeah. It's a, and ironically, it what the SEC is requesting is a permanent injunction, not just a temporary injunction. A permanent injunction gets Ripple selling XRP to US based businesses. You know, accredited investors, not just like the random Joe Schmo in the public, which would ironically, if if they're successful in this, it'd be not great for Ripple, but also it would give the rest of the world a permanent, head start. It just it just blows my mind, like, what is the strategy here besides just, like, trying to get it all to go away?
Robert Swarthout:But it's not gonna happen. It's gonna go all the way in the United States if the SEC got their way, but the rest of the world's gonna kinda continue on with, what they think is right. So anyways, or so our last topic, for the show is on chain data is suggesting a bullish reversal. So the April, like I mentioned earlier in the show, was a negative down month, down 20 ish percent. You know?
Robert Swarthout:I often joke with friends. They're they're like, oh, you know, some of them have been buying these Bitcoin ETFs, and they're like, oh, it's down 5% or 7%. I'm like, wake me up when it's down 20%. I don't really care about the 5% like, you know, you haven't been in crypto long enough if you're worried about the 5%. Right.
Robert Swarthout:Hence, you know, it's so April was down. The signs, like, if you those the super early leading indicators are that maybe this reversal is starting to happen and maybe following the same pattern that we thought would play out here and kind of run towards the end of the year early into 2025 with, kind of the bull market kind of finishing sometime around then. You know, obviously, no price predictions, none of that stuff, but purely just the technicals kind of doing what they need to do, cooling off and kind of catching back up with time here. So
Andres Sandate:Ask you a follow-up question to the the the the nature of the cycle in in crypto. There are folks that when you go back and look at crypto and you go maybe all the way back to 10, 11 time frame and you fast forward 13, 14 years since then. How how do you characterize the cycles? And do you do you see each time, it seems like retail investors come into the space, and then retail investors go out of the space. And it's like this tide, right, comes in, comes out, but things change.
Andres Sandate:And we we see, the space mature, mature, if that's the right word. You see some of the actors get flushed out. How do you when you think about the the cycles of crypto, how do you what are some of the 2 or 3 things that stick out from each cycle? Is it just pricing? Mhmm.
Andres Sandate:Is it new technology? I'm curious.
Robert Swarthout:Yeah. I mean, I I think, you know, on a pure, like, zoomed out, 70,000 foot view, I mean, each cycle's kinda got a theme. Right? Yeah. I believe this current cycle is tokenization.
Robert Swarthout:Certainly, the Bitcoin ETF is part of that. In some sense, the b t the Bitcoin ETFs are a bit stabilizing too. Right? Because it's you would you would want to hope that the investor that's buying up through an ETF and say a brokerage account or wherever it may be, or 401 k for that matter, is more long term thinking and is not gonna be so in and out of the market as you suggested there early. But you're right.
Robert Swarthout:I mean, the, the people that are in crypto in years cycles past, they come and they go. Interest comes and goes. But we you kinda look at it if you zoom way out and kinda look at crypto's entire history, it looks like a a staircase. Right? It goes up and then it comes back down, but it doesn't come back all the way where it started.
Robert Swarthout:So you kinda have these all these shaped steps, but you definitely a, stepping up towards the upper right over time.
Andres Sandate:So the floor so the floor, if you will, of the prior cycle, typically, you you sort of break through that to get to another level. But when the the next cycle is completed Mhmm. It's a stair step above price wise Yeah. You know, where where the last one ended.
Robert Swarthout:Yeah. Okay. Very generalized numbers here. You might look at it as, or think of it as the market goes up, say, a couple 100%, in the bull market and then retracts 80 ish percent as a whole. Mhmm.
Robert Swarthout:Wait a year or a couple years, rinse and repeat, and you kinda get that, stair step effect going on.
Andres Sandate:Yeah. Yeah.
Robert Swarthout:But it, you know, it's to me, crypto is a patience game, but it it is the strategy that I employ. We've got a a friend in Philip that runs a, a crypto fund that, you you know what, he he can make money at any point, basically, with his strategy if he's successful. And, you know, he kinda almost doesn't even care what he's buying and selling. Like, doesn't care what the underlying asset is, what it's doing. He just needs there to be liquidity so he can get in and out of things.
Robert Swarthout:So very different, look in the same market.
Andres Sandate:Right. Yeah. And and some of the markets that if you if you look at things like currencies, commodities, FX, just to pick a few, like, these have been actively traded markets for decades. Right? And if you think about trading and quantitative strategies and real real, active traded man you know, active management, high high frequency type trading strategies when applied to crypto.
Andres Sandate:What, yeah, what is really interesting is, like you said, you see these these these portfolio managers, trading teams, they they really are indifferent to is it maybe is it meme coins? Is it
Robert Swarthout:I
Andres Sandate:what's the underlying technology? Who's the team? Like, it really comes down to, you know, is that trader able to exploit inefficiencies and find value? And maybe the the cycle for that type of approach is a matter of days weeks.
Robert Swarthout:Right.
Andres Sandate:Not, you know, months quarters years. So Yeah.
Robert Swarthout:Yeah. It's, it was fascinating to kind of think through all that stuff. So
Andres Sandate:Yeah. For sure.
Robert Swarthout:Yep. 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. Take care. Take care.