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Topics covered in this episode:
- Winklevoss twins donate $1M in Bitcoin
- SEC vs Ripple case nearing end
- All ETH ETFs had flows of $106M net, $590M ex-ETHE
- Grayscale's $ETHE saw 5% holdings leave day 1
- Bitcoin ETF buying has picked up
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 July 24, 2024. I'm your host, Robert Swartout. I'm joined by my cohost, Andres Sendate. How's it going, Andres? Hey.
Andres Sandate:Good, Robert. Good to see you again. Hope, all is well. Yeah. Yeah.
Robert Swarthout:I am home alone now. My wife, decided that it was too warm and, admittedly, probably too wet in Atlanta at this point. So she packed up 4 of her horses and headed, She's headed to Idaho for a month. So I'll be going out and see her in a little couple weeks, but, it's, it it went from crazy hot to crazy wet. I know.
Andres Sandate:Yeah. This last few weeks. I I was gonna ask you the Teton Pass, there's a portion of the highway that collapsed. Have they created an alternate route? Because I know some of the folks that would work in Jackson Yeah.
Andres Sandate:Would come in from Idaho.
Robert Swarthout:Yeah. So they they have that opens the very tail end, like, last couple days of June. So that's open. They basically just made one it was a bit of a hairpin turn, kind of a sweeping hairpin turn. They kinda just made it a little bit of a tighter corner to kind of cut off the part on the outside that was messed up.
Robert Swarthout:Yeah. They claim it's a temporary fix. I I could also be convinced that it eventually becomes the fix, and they kind of remove the temporary part. You immediately have driven on it. You had you can't really see any sort of difference outside of brand new pavement, and they got concrete barriers kind of keeping you on the road over there while they assess the situation.
Robert Swarthout:So
Andres Sandate:Yeah.
Robert Swarthout:But it it, you know, it's it does have a lot of traffic through it, you know. It it takes people through the past that otherwise you would have to go much further south, and it turns, you know, maybe a a 1 hour drive into a 2, 2 and a half hour drive if you couldn't use it. So important corridor for that part of the country.
Andres Sandate:Right. Well, crypto, making headlines as as always. Lot to cover today. Yeah.
Robert Swarthout:Not a
Andres Sandate:lot of data points, just a lot to cover.
Robert Swarthout:Yeah. You know, it's it's been a lot of other news the last week. Obviously, a crazy world that we're in, at least here in the United States right now. And, you know, crypto's I wouldn't say taking a breather, but it's definitely not been many many new, I guess, quantity of headlines as you kind of alluded to. A lot of stuff in the news over the last week with politics, and some of it kind of bleeds into what we're talking about here is our first point with the Winklevoss twins donating, each each of them donating, 50,000,000, no, assuming 500 500,000.
Robert Swarthout:500,000 by my mouth. In Bitcoin. In Bitcoin. Yeah. Yeah.
Robert Swarthout:So they they donated that to a super PAC that is, supporting John Deaton's attempt to, unseat Elizabeth Warren in Massachusetts.
Andres Sandate:Mhmm.
Robert Swarthout:If there's a single senate seat that needs to have a different person in it, it is her seat, in my opinion. She is the brainchild that is all the anti crypto policy that comes out of this current administration. I don't think there's any sort of original thoughts around crypto, good or bad, coming from the president or the vice president. It's purely, what Elizabeth Warren wants and decides that her desires are from everything that I've read.
Andres Sandate:And she shares the powerful banking synonymity. Right?
Robert Swarthout:And She just has too much influence in in Italy is, you know, I I could talk all day about my view on, career law in politics, but politicians, but we need some new blood there. We need new thinking. Not just because we want it to be positive, but just purely, like, the actual, like, step back and see what might be good for America, versus just being crypto bad, we need to make it go away type attitude. So Yeah.
Andres Sandate:She does seem to have, you know, Gensler and the head head of the FDIC, Is it Grinberg Greenberg?
Robert Swarthout:Yeah.
Andres Sandate:Yeah. Sort of on speed dial, you know, in a way. I think this has come out in the news. Like, you know, they're her lapdogs, I think, as one as one opinion piece I read this morning stated and continue to, you know, have a stance in a position that is gonna, you know, really prevent the industry from getting clarity and, and probably leading, you know, the globe around, innovation.
Robert Swarthout:Yeah. It's just, you know, we've talked many times about it, but it's just ironic The approach that the US has taken to crypto so far considering it is the world financial center, in New York and specifically just like as a country. To think that, like, somehow this new technology is not gonna be part of the American way of doing it, and we can put our head in the sand and still be the leader. If it maybe that is not the intent. Maybe you don't wanna be the leader anymore.
Robert Swarthout:Maybe they should say that, maybe a little less confusing.
Andres Sandate:So But this is another example of, influential, you know, deep pocketed players in the digital asset space, you know, putting their money out there to support specific candidates with, very pro crypto positions. And Deaton has a deep history in the space. So he's he's obviously friendly and well known to the industry. Yeah.
Robert Swarthout:He he made his name, you know, with being the, Amici, counsel in the SECB Ripple case. He represented, I think, a total eventually number is is like 70 2, 75,000. XRP holders kind of joined in with him, and he went from being nobody's name that anyone would recognize unless you were an asbestos lawsuit, to being an attorney that learned securities along the way, I think. And over the course of three and a half, four years, became quite, Internet slash crypto famous. And, obviously, he's maybe making a bit of a career pivot, of sorts to try to be a politician.
Robert Swarthout:And the, the super pack that was set up that the Winklevoss twins donated to, Ripple also, donated a $1,000,000 and there was another, gosh, I'm his his name I'm drawing a blank on. Another crypto attorney that was on Twitter during this the whole lawsuit stuff. He's the one that set it up, in, in support of John. So, you know, we'll we'll find out the result of this come November, but it's, you know, an interesting twist to it all. Because I've followed that ripple case so closely to see someone that I feel like I know.
Robert Swarthout:I've never met the guy, but I feel like I know him, to kinda see him potentially going on and maybe fighting a bigger fight here. So
Andres Sandate:Yeah. Yeah. For sure. Yeah. Alright.
Andres Sandate:Well, second headline, the, you know, speaking of Ripple, the SEC and Ripple, case potentially nearing an end. I know there's an important hearing, scheduled for this week, closed door hearing. The SEC's got
Robert Swarthout:a schedule.
Andres Sandate:They got
Robert Swarthout:they got punted from last Thursday. The rumor is there's settlement talks. I I actually don't believe it, personally, but, you know, I think people are trying to, like, make sense of a timeline. The timeline we're in right now is the remedies portion of the case waiting for judge, Torres to kinda give her ruling on what the remedy should be. I don't understand why Ripple would settle at this point.
Robert Swarthout:If they feel like, you know, if if you read what they've said publicly, they're very positive. Like, they they certainly feel like they have the upper hand. Like, why would they settle unless the SEC is gonna give them a better deal than they feel like the judge is going to, and, like, why would the SEC do that now? The SEC just wants to drag this out. It's been pretty obvious for a long time.
Robert Swarthout:So we're in that kind of, I wouldn't say dark period, or, you know, no speaking period, but we are in a period where we're just waiting for the judge. Her ruling could come out, you know, 5 minutes after we stop this podcast today. So we'll see. Yeah. Yeah.
Robert Swarthout:But, you know, my if I had to place a, a wager, I would say that Ripple's total weather penalties, and all the basically, any money that they may owe at the end of this, I would say it's less than $100,000,000. Probably maybe in the 50 to 75,000,000 if I had to throw a dart at the wall and hopefully hit something. So
Andres Sandate:And considering their legal expenses over the last several years in this case. Approaching 200. Yes. Right. There probably a multiple of that.
Andres Sandate:So that might not be a bad penalty.
Robert Swarthout:Yeah. And, you know, just to have the case behind them, you know, I think that it would be they'd be, in some ways, happily pay that. Essentially, since the SEC is also asking for close to 2,000,000,000, you know, that number would be, a rounding error of what I suggest. So we will see hopefully soon, and, maybe we could finally put this behind us once and for all and assuming nobody in your
Andres Sandate:office to, appeal. Is your is your what's your take on the impact of a positive ruling? Let's say they pay a fine, but it's nowhere near the 2,000,000,000 Sure. Number. It it's in that 50, 100,000,000 range.
Andres Sandate:Mhmm. What what is your overall take on the impact that, a sort of favorable outcome, Ripple saying, hey. I wanna get this behind us. We wanna put behind us and move forward. The SEC, you know, of course, puts out its press release saying, oh, you know, we got $200,000,000 from
Robert Swarthout:Mhmm.
Andres Sandate:But at the end of the day, it's probably a win for Ripple.
Robert Swarthout:Mhmm.
Andres Sandate:What what's your take on the impact of the broader industry and then, you know, whether it's XRP specifically or or, clarity for digital securities?
Robert Swarthout:I think that any sort of broader, impact was had last July in 2023 when she came out with the ruling saying at the time again, this whole case has never been about the broader industry. People have been trying to apply it in different ways, but, you know, she said that XRP in and of itself is not a security. It's all about how it's packaged, and sold and resold or whatever. But the stuff XRP that you buy in, you know, at the time you couldn't, but you can now buy it on Coinbase and whatever US exchanges. That is not a security.
Robert Swarthout:It obviously doesn't come with any rights outside of just owning the token. So So I don't think that impacts the industry. I think that at this point, the the impact you might see is Ripple actually be able to use XRP within their software for US based businesses. I think they said something like 95% of all the business they've, signed customers up to since the lawsuit started has been overseas. So that's like December of 2020 of 2020.
Robert Swarthout:You know, it's our you know, there's always long been rumors that, you know, there's big banks, of America being one of them, that is waiting to use it for cross border payments. You know, time will tell, but I think you might see a a price spike in the short term, with a ruling from George Torres that, you know, doesn't put Ripple out of business. I don't see how that would happen at this point where they would go out of business. They're spending money on acquisitions and other stuff that if they felt they were nervous about to have to pay a big fine, they probably wouldn't be spending that kind of money. So we'll see.
Robert Swarthout:It's a, it's, I've spent a lot of time thinking about this thing, and I'm ready to think about other things. So
Andres Sandate:Well, we'll have we'll have, hopefully, some news to report back over the next few weeks. Yeah. Alright. Well, moving forward. So an exciting, I guess another exciting milestone, not to not to, overlook the, you know, the the obvious, but obviously that this, you know, this transaction of BTC getting approved, everybody immediately after BTC, ETF started trading, everybody immediately started asking about when is Ethereum ETFs, you know, gonna start trading?
Andres Sandate:So bring us up to speed on, you know, the the launch and also, you know, who's gathering all this at all these assets.
Robert Swarthout:Yeah. So we were talking about the Ethereum ETF, I would say almost weekly back in late May or early June, and we thought it was coming. Then all of a sudden there was a quiet period, then it finally came. So I guess, to bring us up to today, today being July 24th, on July 23rd yesterday, Tuesday, the the ETFs, for Ethereum were able to start trading in the US, and, you know, they they had a rather good day. If you compare the 1st day of Bitcoin trading to the 1st day of Ethereum trading, I believe it was let me look at my get my number right here.
Robert Swarthout:It was, 83%. So the first day of trading for the new 9 Bitcoin, that they did 720,000,000, and the first 8, in the trading day for the first 8, Ethereum ETFs on the first trading day did 590. So 83%. That's well above what I would have ever guessed. Yeah.
Robert Swarthout:There was a lot less fanfare. It's almost almost like it started launch with the whimper. Mhmm. And, you know, I think long term there's no way that it holds that same percentage to me. I would be I mean, maybe I'll have to come on here and say I was wrong, but I just want to perceive that being the case.
Robert Swarthout:But, you know, it was, good inflows, and net inflows of a 106,000,000 across all 9 of them. If you include the gray scale, mini trust that converted, in their assets in, they still have a 2 and a half percent, fee. Everyone else is in the point 2 to point 3 range. Some maybe Yeah.
Andres Sandate:20, 30 basis points. Yeah.
Robert Swarthout:Yeah. And but if you exclude the gray scale, numbers, just all of them from yesterday, the these 8 ETFs had inflows of 590,000,000. So good day, and we will see how it kinda plays out over the next weeks or months. But it's a
Andres Sandate:It's it's got, you know, it's gotta be looked at by the industry as a positive. Right? I mean, there's Yeah. It it any way you sort of slice it, I think the, you know, the the the good thing in all of this is that they didn't come out with a whimper. Right?
Andres Sandate:If they if they had launched to 20, 30, 50,000,000, I think a lot of people would said c. But the fact that they raised, attracted so much capital, I think, demonstrated there were a lot of people following the, the launch. And, any early indications about sort of who the, is there any sort of leader leaders? Is it the same kind of names of of who's gathered the most, assets across those new ETFs?
Robert Swarthout:So we'll we'll throw a grayscale aside. Ishares, the the BlackRock 1 had inflows of 200 and 60 wait. Am I looking at the right thing? Yes. 266,000,000.
Robert Swarthout:Yep. The 2nd place position would have gone to Bitwise at 204,000,000, and then it quickly drops off to 3rd place at Fidelity. But, yeah, it's, you know, early days. And, the part that surprised me was how much of the grayscale trust or now ETF, for Ethereum was sold. 5% of the holdings left in the 1st day.
Robert Swarthout:Like, heavy. Obviously, if you go from 590 down to a 106,000,000, you see that's Grayscale had a huge impact at least on volume. And 5% of holdings leaving in a day basically says, no. Thank you to the 2 a half percent fee. Yeah.
Robert Swarthout:We have to see how long it takes to bleed down. So Bitcoin their their Bitcoin trust now ETF went from forget how many, 1,000,000,000 in assets, but it halved in about 90 days if I'm not mistaken. So Wow. This may be on a similar trajectory.
Andres Sandate:So Yeah. I mean, fee fees matter to to people that are index investors or mutual fund investors that that suggest that they're asleep at the wheel and not paying attention to fees, like, especially when it comes to these indexes, and you can get them 10 x cheaper.
Robert Swarthout:Right. Yeah.
Andres Sandate:You know, especially if you have an adviser or somebody knowledgeable at the controls watching this stuff, it's, yeah, there's there's no doubt that, you know, their that the assets are gonna outflow to a less expensive product. Well, I saw, you know, I saw Matt Hogan from Bitwise for the second time, at a lunch, and we were talking about amongst a group of advisers and and other investors, you know, the the pending launch of of, of the ETF from Ethereum, and he was optimistic. But I think even he even if if if they raised 50 or 75,000,000 would have been ecstatic. So the fact that they pulled in at Bitwise over 200, and now have, at least after one trading day, the 2nd largest exchange traded fund
Robert Swarthout:on
Andres Sandate:the Ethereum side, you know, says a lot. So that's, yeah, so that's another one that we're gonna need to follow because that comes on the heels of some big wire houses and some advisory platforms approving
Robert Swarthout:Mhmm.
Andres Sandate:BTC, right, for allocation into client accounts. So it'll be interesting to see what, what the timeline is for these these ETFs to get approved.
Robert Swarthout:Yeah. You know, the part that I was thinking about the other day, so these are launched well, at the time they were about to launch, but, you know, now that they're launched, you know, it's Bitcoin launched in mid January. We're still seeing these warehouses in many cases not have them on the platforms yet for advisors. So call it 6 months later, you're still not having it. Are is there gonna still gonna be the same kind of delay for Ethereum?
Robert Swarthout:Or are are they gonna start doing these with a much quicker clip and getting them on the platforms so advisors can do some diversity if they wanna do some diversity within this asset class versus the same. Yeah. Well, digital assets is Bitcoin, which I, you know, I guess works, for a short period of time. But once there's other products, it becomes a little more challenging, I guess. So
Andres Sandate:Yeah. That's right. I mean, you know, and and some of these, you know, some of these advisors, I think, now that there's a second ETF out there. Mhmm. I I think the question comes to that advisor who gets the phone call, you know, about the person reading the Wall Street Journal or Barron's or watching CNBC and they keep seeing, you know, these tickers.
Andres Sandate:They keep seeing, you know, more talk about crypto. They keep hearing, you know, on their favorite news channel, politicians taking views, super packs raising money. Like, it's just it's gonna eventually lead to that conversation with the adviser about, like, what are we doing here on digital assets? So I, yeah, I know I'm getting a as an adviser, I'm getting a flood of of inbound information about the case for Ethereum, why you should pay attention. There's a lot of education opportunities out there for advisors and people managing money.
Andres Sandate:And, and I'm I'm gonna be surprised if we don't start to see some of these platforms approve Ethereum's ETFs, quicker than it than it has taken to get the Bitcoins approved.
Robert Swarthout:Yeah. You know, it's the model so far, seems to be you need to have a futures market that's trading, that's liquid, all that kind of stuff. The c basically through c me, and then you can, apply for a spot market. There's no other tokens currently that even has a futures market. It sounds like there's futures markets coming for XRP.
Robert Swarthout:There's been some talk with Solana 1, but immediately I can't imagine they get a spot without having, at least with this SEC, in place, this SEC line of thinking, I guess, I should say. So we'll see. It's a ever changing market, but the rules are not clearly defined. So we think we understand the rules at least. So
Andres Sandate:Yeah. I mean, I think overall, still a lack of regulation and a lack of clarity continues to be one of the big hurdles in the industry. I I was gonna say one one final piece. I had I had, the head of the funds group at Jersey Finance, which is a jurisdiction off the coast of France on my podcast, the ATL Alts podcast yesterday, and we were talking about jurisdictions and why managers, particularly those in the US, are choosing Jersey to set up an offshore fund.
Robert Swarthout:Okay.
Andres Sandate:Well, in Europe, if you wanna raise capital in Europe, if you're a US based investment manager
Robert Swarthout:Mhmm.
Andres Sandate:You have to follow a set of regulations that effectively are there to, you know, protect the investor, the consumer, etcetera. Well, all these rules and rags make it quite difficult for managers to navigate. It's quite complex. So a lot of managers will choose to go with a offshore jurisdiction like Jersey, which is not a part of the EU. And not say work around the regulations, but they get, a way to sort of apply regulation light type protocols.
Robert Swarthout:Okay. And
Andres Sandate:in this conversation, we just talked about innovation. And, ultimately, what I kinda came to conclude after the the hour was, you know, investors are gonna find ways to invest. Investors have found ways to invest in digital assets. They're learning how to open up accounts. It's cumbersome.
Andres Sandate:It's complicated. They're gonna eventually, I think, go to advisers that support their desire to invest in in crypto. I think that over time, you're gonna see more and more of that adoption. And in the case of, like I said, jurisdictions, the big the big driver for business for why managers go there versus Cayman versus Ireland versus these other jurisdictions is they can provide certainty and clarity to the manager and the manager's investors. In these other jurisdictions, that's just not the case.
Andres Sandate:And the only way they got there is because private industry, regulators, and government all worked together at the table to try to come up with some sort of sensible legislation and essential sensible policies. And as a result, they're attracting a ton of business from managers that wanna raise capital in Europe. And I don't know. I thought about that and said, man, that's how we should do things here in the US with crypto, but we we just we just make it hard. We just Okay.
Andres Sandate:We we do it, but we we we try every was it the famous quote? The US will try every other approach before
Robert Swarthout:Trying the right one. Trying the
Andres Sandate:right one.
Robert Swarthout:Yeah. Yeah.
Andres Sandate:So yeah. So sauce.
Robert Swarthout:Yeah. That's interesting. Yeah. You know, I just look forward to a day where policy is not the driving narrative around an industry's lack of growth or hampering to growth. And I think that we might be, I don't know, a year, year and a half out from if if we get a new administration, having the ability to kind of have some more fair rules.
Robert Swarthout:So we will see.
Andres Sandate:Yeah. I think when you zoom way out, there's a really good article that came out, and I have to pull the the publication. But it talked about regulation of the Internet back, you know, in the first 15 or so years of the Internet as these big platforms, Google, Meta, Amazon. As they got bigger, we started to see, you know, regulation kinda take shape. Now it didn't kill those industries, and there's certainly challenges with the Internet.
Andres Sandate:But because there was a a a willingness to sort of put regulations in place, you look at some of the largest tech companies in the world, with the exception of a couple in Asia, they're in the US. Absolutely. Now the opportunity exists for that same thing to potentially happen with with digital assets, crypto, digit you know, blockchain. But without regulation, those big winners, those bigger platforms, the next meta, the next, Amazon could be offshore.
Robert Swarthout:Right. And it's not just like that they're here in the US, for jobs. It's the it's the wealth that they, create for the employees and this this obviously shareholders can be worldwide, but like the wealth for the employees and then the money that they spend in their communities. I mean, like it has, a lot of this word gets overused a lot, but trickle down effects. There's a lot of that happens in that kind of scenario.
Robert Swarthout:So we we, we're hopeful, I guess. So the last point we have here, kind of back on ETFs real quick, is the the Bitcoin buying ETF buying has picked up. It there was net outflows, in mid June, at the tail end of q2. Q2, as we talked about last time, was not a fun quarter for crypto. Bitcoin in the month of June saw a 20% sell off just by itself, and typically all coins are more magnified, in the up or down position.
Robert Swarthout:But it's a, you know, if you look at the chart of it, it's yeah. The I guess the week the 2nd week of June was the bottom, and then literally it's been up to the right. It's not quite parabolic, but it's, 45 degree angle. So it's cool cool to see. Yeah.
Robert Swarthout:That's, you know, we are not going out of business, and, we can, start, you know, hopefully, the plan plays out, through the end of the year.
Andres Sandate:Right. Do you, yeah, do do you have thoughts about what has, brought, buyers back into the market? Is it just attractive price point or is
Robert Swarthout:there something I think it's price point. I think, admittedly, around that time, that's when, former president Trump made part of his platform that he was crypto positive. Yeah. Prices were positive that week. And just generally the sentiment in the news cycle around crypto, changed around that time.
Robert Swarthout:It felt like, oh my gosh. We have someone that actually is listening to us. Yeah. And, you know, there's millions of people that are crypto holders and, you know, I can't imagine there's many undecided voters in the country at this point, but maybe there's some, and maybe people are willing them to be a single issue voter, or Mhmm. Or a single number of issues voter.
Robert Swarthout:So we will see. It's a no. I I really don't care what these politicians say. It's all about the actions, and, we just need to kind of we we need something different. I don't care who brings it at this point.
Robert Swarthout:So Well, I
Andres Sandate:you know, I think we're gonna see over the next several months a lot more politicians, at least in competitive races ask what is their view, what is their position, what are they planning to do with crypto? Because I think I think the idea that, you can just sort of say, well, we gotta protect the general public and have this sort of, talking points is I think it's beyond for that particular type of voter. I think the voter that's completely unfamiliar with crypto, completely unsure what it is, how it works, they may not be even close to beginning to wanna buy it. So I think it's much more about that voter. And the question is, are they a swing voter?
Andres Sandate:Are they a voter in competitive, race? You know, the the states the states that are gonna be up for grabs is at least when it comes to the presidential election. You know? Historically, it's places like, Wisconsin, Pennsylvania, Michigan, Arizona. So we'll see.
Andres Sandate:There's crypto holders everywhere now.
Robert Swarthout:So Yeah. There is an, middle of Georgia is in Georgia. It was was purple well, blue last time, but very much purple. Yeah. Historically red.
Robert Swarthout:So we'll see if it ends up being another swing state. So Yeah. Awesome. Well, thanks for joining us on this episode of the Google crypto check-in. If wanna stay updated on future episodes, you can find us any podcast player by searching Teton Crypto Capital or weekly crypto check-in.
Robert Swarthout:Take care. Take care, everyone.