21st May 2024 > > We all love a 7-handle in the am.

tl;dr

We all love a 7-handle first thing in the morning. Spot ETH ETFs have moved closer to approval.

Market Snap

Market Wrap

Leveraged shorts got smoked, resetting the perpetual futures markets back to neutral.

And as remarkable as it sounds, it has been five weeks or so since we last woke up to a 7-handle. It is nice to be back. All eyes on a new ATH and then the price threatening an eight-handle.

Curious Cryptos’ Commentary – ETH & spot ETH ETFs

Was it really only Sunday when the CCC commented that “The underperformance of ETH vs BTC may be about to reverse course”? Well, that happened in style yesterday, with BTC up 6% and ETH up 17% as of today’s Market Snap.

I believe the reasons are those we have been discussing of late in this missive.

There’s the DoJ insisting that ETH is decentralised and therefore not a security.

We have intense pressure from the lawmakers in the US to dramatically reshape the legislative landscape around cryptos, pressure that will likely be too great for Joe Biden to ignore and to follow through on his threat to veto crypto-friendly regulation, not least in an election year. A veto would put him at odds with the second most important Democratic politician in the US (no, not Kamala Harris) but Chuck Schumer, Senate Majority Leader who represents New York. Chuck knows his party is developing, and deliberately so, an anti-crypto reputation, and he wants no part of that.

…

Which brings us to the subject of spot ETH ETFs.

I have long assumed these are a done deal, just not yet.

The clincher for the launch of spot BTC ETFs was the description of the SEC’s actions as “arbitrary and capricious” by a judge when Gensler refused Grayscale’s application to transform its trust, GBTC, into an ETF. Grayscale also has an ETH trust. Again, if the SEC refuses a request to turn this trust into an ETF, that must surely be “arbitrary and capricious”.

So far, the SEC has delayed the decision on approval or not for the raft of spot ETH ETFs sitting in Gensler’s in-tray. CoinDesk has reported that internal sources at the SEC are asking exchanges to update 19b-4 filings for spot ETH ETFs on an “accelerated basis”, perhaps by tomorrow morning. These filings are the first step towards approval.

In the short-term, ETH price action could become very choppy, giving plenty more opportunities for the leveraged children to lose even more money than today.

In the medium-term, the approval of spot ETH ETFs is maybe coming a little more quickly if these sources are correct.

The launch of spot ETH ETFs will be beneficial for the price of ETH and for BTC, as it makes the whole crypto space that much more acceptable to the laggards in the investment industry who are still debating internally whether to get involved or not.

They will also allow for diversification within the crypto space, and once the issue of staking within an ETF is resolved (this is quite a biggie by the way), this product becomes one that provides an income stream with high visibility.

Just one more step on the road to full adoption of cryptos as an investment class.