22nd October 2023 > > ETFs, Coinbase, & MS.

tl;dr

ETF speculation drives BTC higher again. Coinbase takes advantage of Ireland’s world-beating tax regime. Morgan Stanley gives us a nature lesson.

Market Snap

Market Wrap

That’s seven breaches of $30k since yesterday evening suggesting that, in techie language, this psychologically important level is not being rejected.

Speculation about approval for a spot BTC ETF is likely to grow in the coming weeks, for it is hard to see how the SEC can continue to stand in the way of history. If only we could see BlackRock’s internal notes and predictions for the immediate size of retail and institutional interest.

Glassnode reports that 76% of BTC is now in long-term wallets, defined as holding for a minimum of 155 days. Intriguingly, 50,000 BTC are being added to that stash every month. I think we are unlikely to see these coins again for a very long time, with just one proviso which we will come to in a minute.

With 19.5mm coins having been mined, that leaves a free float of just 4.7mm valued at $140bn, less than 1% of the total assets under management for the firms with applications for a spot BTC ETF sitting in Gary Gensler’s in-tray. If my working assumptions are correct – that BlackRock et al are only interested in spot BTC ETFs because of significant and material client demand – there is a potential supply shock brewing, with all the price implications of such a shock.

But before we get too carried away, that proviso I mentioned.

Perhaps the demand for an ETF comes mostly from current holders, who will willingly pay nominal fees every year for the security of holding BTC via an ETF, and not in their own private wallet with all its attendant risks. In this scenario coins will simply be recycled from holders to the asset managers, and back again in ETF form. It’s an unlikely outcome, but it cannot be dismissed as a potential cause of disappointment.

Curious Cryptos’ Commentary – Coinbase and Ireland

Coinbase is already licensed and registered in several EU countries.

It has now announced its intention to site its European HQ in Ireland, leaving open the option to move out of the US altogether, a move that it has threatened to enact in the past in response to the SEC’s illegal regulatory overreach.

This is the positive draw of the EU’s foresighted and globally lauded leading crypto regulation MiCA (Markets in Crypto Assets). Every day we see crypto tax dollars accruing to the EU, whilst the US and the UK languish far behind.

This is also the effect of Ireland’s status as one of the two largest tax havens in the world (the other being Lichtenstein, a fellow EU member).

The Republic of Ireland runs a budget deficit of 1.9%. The UK runs a budget deficit of 5.9%, which is unsustainable in the medium term, let alone the long term.

There could be a lesson or two buried deep in this commentary that might be helpful for some politicians to consider.

Curious Cryptos’ Commentary – Morgan Stanley (MS)

MS has long been a staunch supporter of cryptos, making its first investment in MicroStrategy the exact same day as the CC Treasury’s first investment. I still wonder to this day how the news of our investment leaked so quickly to the decision makers at MS, hence forcing them to act, but that is all in the past now, and I should let it go.

MS has released a report about the “Crypto Spring”. Some key advice is given:

“While no one can tell you if now is the right time to buy or sell cryptocurrency, today is the right time to learn more about the crypto market’s cyclical tendencies.”

It’s a short read, and well worth the time taken:

https://www.morganstanley.com/articles/the-four-seasons-of-cryptocurrency-explained