20th June 2024 > > ETH.

tl;dr

ETH is NOT a security! Buying ETH ETFs will require a shift in mindset for those who are staking ETH today.

Market Snap

Market Wrap

The trading range for BTC and ETH remains tight. Alts are up a little since we last spoke, but they show no great enthusiasm. The boring phase is now the commonly accepted description for where we are now.

Curious Cryptos’ Commentary – We’ve all been there

h/t Milk Road

Curious Cryptos’ Commentary – ETH is not a security

The SEC has long muddled its thinking about ETH.

Before the transition to PoS from PoW, internal SEC documents appeared to concede ETH was not a security. When asked during Senate and House hearings whether he believed ETH was a security or not, Gensler’s answers were invariably embarrassing (for Gensler that is) non-answers.

To a certain extent, the SEC’s hand has been forced. A raft of legal cases threatened to go against the SEC, adding to the long list of legal judgements that have not gone in its favour. Gensler does not want to be described as “arbitrary and capricious” once more in a court of law.

Consensys, creator of probably the most popular crypto wallet MetaMask, filed a lawsuit against the SEC just two months ago. Rather than defend itself, the SEC has effectively conceded in writing that ETH is a commodity.

A spokesperson for Consensys, repeated the consensus opinion regarding the SEC’s unwavering support of Operation Choke Point 3.0:

“The closing of the Ethereum investigation is momentous, but it’s not a cure-all for the many blockchain developers, technology providers, and industry participants who have suffered under SEC’s unlawful and aggressive crypto enforcement regime.”

…

But not all is rosy.

If the SEC had maintained a public stance that ETH is a security, but still approved spot ETH ETFs, that would open the doors for other crypto ETFs, specifically SOL.

This latest development must surely delay the day of a spot SOL ETF, to the disappointment of the CC Treasury team.

Curious Cryptos’ Commentary – Spot ETH ETFs

We know they are coming, and soon.

There will be rotation out of physical ETH into the ETF by some investors, who are prepared to forego the 3%-3.5% staking rewards in exchange for secure custody. Not a bad trade, and one well worth considering, but with one important caveat.

Missing out on 3% staking gains accrued daily will rapidly escalate for long-term holders due to the wonders of compound interest. To mitigate this downside, you need to treat the 3% as an actual charge to your bank account, take that cash, and replenish your holdings of the spot ETH ETF, spread out on a monthly basis. If you do not do this, and ETH rallies 10x plus from here, you will regret it.

This rotation from current holders will not add additional demand for ETH. Institutional adoption of spot BTC ETFs has been slower than expected, though it is building daily. Institutional adoption of spot ETH ETFs will be even slower than that for BTC.

The ETH ETFs are not the immediate game-changer that some seem to expect. But it is always better to be early to the party.