26th February 2024 > > RIAs & spot BTC ETFs.

tl;dr

ETFs again – RIAs and the rosy prospects for ETH.

Market Snap

Market Wrap

No obvious sign of Asia front-running today’s expected inflows into spot BTC ETFs, however that is quite a move in the perpetual futures funding rates, raising the risk of a long squeeze lower.

Curious Cryptos’ Commentary – Turn it up a notch

Someone bought over 26,000 BTC valued at well over a billion dollars on Friday:

Show some conviction dude. I mean, if you aren’t serious about cryptos, why get involved?

Curious Cryptos’ Commentary – Registered Investment Advisors (RIAs)

This is a development I hadn’t thought much about before now.

Carson Group custodies $30bn of assets for affiliated RIAs to serve their retail client base. It has now approved four of the new-borns to appear on its platform. Before, none of their RIAs or their respective clients could buy spot BTC ETFs. Now they can.

Advisors like Carson oversee trillions of dollars of investments. I see an estimate that half of all investment wealth in the US is managed via RIAs and their list of approved products.

One investment manager, Vanguard, has publicly stated that it will not allow spot BTC ETFs onto its platforms, sparking a campaign on X to encourage investors to move their funds away from Vanguard to more crypto friendly managers. Some, like Fidelity and Charles Schwab already provide access. I suspect the vast majority are still undecided but I am quietly confident most will adopt these new products.

This new source of demand for BTC will come online over the coming months, week by week. Reduced supply and greater demand only ever leads to one result.

Curious Cryptos’ Commentary – ETH ETF

Grayscale has applied to the SEC to convert its Ethereum trust into an ETF.

You will remember that when Grayscale applied to convert its BTC trust into an ETF that request was initially met with rejection. After a judge later declared that the SEC’s actions in this respect were “arbitrary and capricious” the path to approval was clear.

Coinbase has joined forces with Grayscale in its latest battle with the illiberal ethos projected by the SEC, issuing a 27-page document explaining why the SEC should give approval:

https://assets.ctfassets.net/c5bd0wqjc7v0/5ffEPeAh1qv8p7BksKFctz/e17307dfe5d692002c6f842807ff4272/Grayscale_Ether_ETP_Application_--_Coinbase_Response_Letter_to_SEC.pdf

I am going to be straight with you, I haven’t read this document in full. It is Sunday afternoon and I feel a movie coming on.

But glancing through it I note two things which I think are devastating for Gary Gensler and the SEC, if it is minded to continue rejecting the concept of a spot ETH ETF.

The paper refers to the hilarious grilling that Gensler received at the hands of the House Financial Services Committee in April 2019. After some initial obfuscation about “excluded commodities” and “included commodities” (an arcane commentary of precisely zero relevance to the topic) his point-blank refusal to directly answer any questions is a masterclass that matches the infamous Jeremy Paxman/Michael Howard interview in 1997:

https://www.coindesk.com/policy/2023/04/19/sec-chair-gensler-declines-to-say-if-ether-is-a-security-in-contentious-congressional-hearing/

“It depends on the facts and the law”. Thanks for that insight, Gensler.

The other killer for the SEC is that having approved futures-based ETH ETFs there is no viable means of arguing against a spot ETF.

In conclusion, according to Coinbase:

“The ETH market and the Exchange’s surveillance-sharing agreement with CME support the position that the Exchange’s proposed rule change should be approved for virtually identical reasons articulated by the Commission with respect to spot Bitcoin exchange-traded products ETPs. For that and the other reasons described in this letter, approval of the Exchange’s proposal is the appropriate action for the Commission to take.”

…

And here’s another prediction of mine.

Spot ETH ETFs will not cannabalise spot BTC ETFs, they will simply attract new investment money into the crypto space.