31st May 2024 > > Spot ETH ETFs & US politics.

tl;dr

Spot ETH ETFs draw ever closer. Trump’s guilty verdict is good for cryptos, which is all we care about.

Market Snap

Market Wrap

Yesterday the US Treasury initiated a buyback program for US government debt. Call it what you like, this isn’t even disguised QE – it is QE. Though starting at only $2bn a week, it will be ramped up in advance of November’s election.

An ironclad rule of finance is that when the money printer goes brrrrr, prices of hard assets go up.

With interest rates soon to be cut in the EU, when will the incompetent team that runs the Bank of England sit up and notice that QT (quantitative tightening) in the form of selling QE derived bond holdings is simply the very worst idea since QE was implemented in the first place.

Curious Cryptos’ Commentary – Spot ETH ETFs

Following BlackRock’s submission of an amended S-1 form the SEC has asked the other proposers to submit their forms by today.

We don’t know how much discussion has already taken place about the contents of these forms. We don’t know how close they are to being finalised to the SEC’s satisfaction. What we do know is that we are getting close. This is a done deal, it’s only about the timing now.

One aspect of these spot ETH ETFs has gone largely unnoticed.

Maybe a month or more ago, the SEC asked all proposers to remove any staking element from the proposed ETFs. This decision was motivated by several cases the SEC is pursuing in which it claims that staking services are in of themselves a security. If the SEC allowed the ETFs to stake the ETH held in the ETFs, its other legal actions would be undermined.

This is a classic example of how a bureaucratic body set up supposedly in the interests of investors actively works against their interests. The FCA in the UK is a master at failing UK investors in just this manner.

ETH staking rewards are around 3.5% per annum for dedicated staking of a minimum of 32 ETH, which can now be easily executed using services such as Kiln through the Ledger Live app rather than setting up your own node. Pooled staking for virtually any size of ETH gives rewards closer to 3%. Investors in the ETFs will be effectively paying 3% plus per annum for the ease and security of owning ETH in the ETF compared to self-custody.

There are many who will think this is a price worth paying. And there are others for whom self-custody is a non-starter. However, this lack of a staking mechanism within the ETFs will dampen demand to a degree.

Curious Cryptos’ Commentary – Trump is guilty

There has been plenty of polling in advance of that guilty verdict that showed that Donald Trump being found guilty only increased his chances of becoming President again.

Joe Biden was already under pressure to pivot towards cryptos, as shown by the sudden change in the official stance towards spot ETH ETFs. I know some people cling to the naïve belief that the bureaucrats are apolitical, but it just ain’t so. Warren’s anti-crypto army, and her top lieutenant Gary Gensler, have been warned off. This pressure will now ratchet higher.

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I am in the Elon Musk approval camp, though I know that isn’t a universally acceptable point of view. Elon has denied that he is advising Trump on crypto matters, which probably means he is. Elon says he’s:

“… in favour of things that shift power from government to the people, which crypto can do.”

This is libertarianism writ large. All politicians and their advisors need to recognise there are more votes to be had in being liberal rather than in being authoritarian.

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But perhaps the polls are wrong. The relative price divergence of two of the larger politically inspired memecoins – JEO BODEN and DOLAND TREMP – since the guilty verdict tell a different tale: