22nd July 2024 > > US politics & spot ETH ETFs.
tl;dr
The US now has another chance to take a bi-partisan approach to cryptos. Spot ETH ETFs launch tomorrow.
Market Snap
Market Wrap
$70k looks tantalisingly close for the first time in six weeks.
Those rumours of BTC being held as part of the Fed’s reserves after the election are being furiously circulated on X. We all want it to be true of course, but it seems like a long shot to me. @Rewkang makes an obvious yet intriguing comment:
“BTC now being rumored to be pushed forward as a national asset held as treasury reserve as a platform for many politicians
Whether they are successful or not in the first attempt, doesn’t matter because BTC now has an extremely visible asymmetric upside scenario
If successful, there are very plausible asymmetric mid term scenarios for $500k+, $1m+ price targets and even if you have probabilities of that at 5%, 10%, Bitcoin here is very underpriced because the market just moved up from <1%” (punctuation errors are his, not mine).
Curious Cryptos’ Commentary – US politics
With 50mm or so owners of cryptos in the US, the withdrawal by Joe Biden from the Presidential election offers an opportunity for his replacement to reset the Democratic Party’s stance on cryptos away from antagonism and fear, to one of acceptance, support, and recognition of its benefits.
The initial price action for BTC on this news was to drop 3%, presumably because the odds for Trump being re-elected had lengthened. Prices quickly recovered with the realisation that Kamala Harris, who famously confused the US southern border into Mexico as being the gateway to Europe, is even less likely to win than Joe Biden, despite his glaringly obvious frailties.
Any contender who wishes to challenge Harris could do a lot worse than follow the advice of Cinneamhain Ventures partner Adam Cochran:
“I think you’d expect an attempt to distance themselves from Gensler, Warren and Biden era policy on crypto.”
That would give attendees at the forthcoming Democratic convention something to ponder before embracing a devastating defeat with Harris at the wheel.
Curious Cryptos’ Commentary – Spot ETH ETFs
Barring any last-minute hitches, or hijacks from the naysayers, five or more new spot ETH ETFs will launch tomorrow in the US.
It is most unlikely that this will have any major price impact for ETH or any other crypto, unless it turns out to be a sell-the-news event. As we saw with spot BTC ETFs, the launch is just the start of a long process. IFAs and investors need to do their due diligence. Though you and I might expect that to have been completed already in preparation for this exciting new financial product, it seems that the world just does not work that way. At least not any more.
The biggest issue around these ETFs is the lack of a staking option for the issuers, and hence the lack of staking return for the investors in these ETFs.
If you own and self-custody ETH there are plenty of options to stake ETH in return for 3-4% rewards per annum. If your wallet is a Ledger Nano (and I am confident that is the case), the easy routes include dedicated staking of 32 ETH with Kiln or Figment, or joining staking pools for any size of ETH with Kiln or Lido, or liquid staking with Lido or Stader Labs also giving you the option of using your staked ETH to earn yet more income from DeFi. Indeed, you can re-stake your stETH (itself a liquid staking token) to own another liquid staking token, Re-stETH. Rinse and repeat depending on your risk tolerance. (*)
These options are not available to the ETF issuers due to concerns raised by the SEC about potential liquidity problems, concerns which I freely admit are valid and legitimate. ETF issuers need to be able to issue or redeem the ETFs immediately with APs on demand. Staked ETH can take up to a week to withdraw, a gap too big to guarantee the liquidity requirements rightly and correctly imposed upon the ETF industry,
There may possibly be creative solutions to this impasse which might pass muster with the SEC in the future, but for now, there is an effective fee of over 3% for anyone buying the ETF compared to buying ETH itself.
This alone suggests to me spot ETH ETFs will be far more of a slow burner than we have seen with BTC.
…
(*) If you have any questions about the options for staking ETH, the CCC research team is at your disposal. Email us and we will do our very best to help you through the somewhat confusing options available.
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