All Been Crypto — Week 24 May 2024
What a bullish week BTC +5% and ETH +27% as all things point to ETFs soon. We saw Market Cap now above 2.7tn and BTC/ETH ration trend reversing first time meaningfully this year. Crypto in the US is getting more and more political this week we saw a likely politically motivated 180 from the SEC on Spot ETH ETFs which had all the asset managers scrambling to update their filings ahead of the deadline. We also had a pro crypto bill pass the House with strong bipartisan support. We had a controversial announcement by some of the core ETH researchers on their advisor role with Eigenlayer, another multi million dollar hacker that then ended up returning the funds, Hong Kong regulators ordered Worldcoin to cease local operations, and of course strong raisins with Farcaser topping up 150mm, Kelp raised at 90mm valuation. Enjoy reading!
Bat Tai Chi — btc21@mail.com
HEADLINES:
ETH spot ETF likely approved without staking
This was the big news this week. ETH up 30% wow on what caught pretty much everyone off guard. Except maybe the Grayscale guys who withdrew their futures application a couple of weeks back ( see ABC 10 May 2024) Regardless all of them are now rushing to amending their 19b-4 filings to exclude staking. Which seems to be the only major pushback from SEC at this stage. All major asset managers including BlackRock, Grayscale, Bitwise, Fidelity and VanEck. Bloomberg got a good handle of this and called it a likely politically motivated move given how Trump has embraced crypto and the current bills showing Democrats getting nervous heeding the topic entirely to the Republicans. What speaks for this theory is that there has apparently been no signals from SEC ahead of this weeks deadline, whereas with BTC approvals there was a clear dialog ongoing months before. Bloomberg notes however that this time given the apparent last minute shift in stance a potential approval this week would not mean that the instruments would list so soon, as there’s other admin to be done so we could face a few week before the first spot ETH ETFs actually become tradable in the US. And then there is the debate about institutional demand given crypto native holders prefer of course the staking or shall I say re-staking yields rather than pure ETH exposure. You will see a lot more of that debate once the instruments are live but again that could give us another leg of growth. What is even more important though is spot ETH ETFs potentially open the door for other products and take away the stigma of it potentially being labeled as a security.
Gala Hack
A hacker exploited the smart contract and managed to mint a few billion of new GALA which he then swapped worth around 23mm on Uniswap before the team managed to freez remaining balances. They also worked with FBI, DOJ and a network of international authorities and potentially found some good leads. Because a few days later the hacker returned 23mm worth of ETH to the protocol. The CEO suggested to buy back and burn the GALA so unsurprisingly the token price did a round trip and now pretty much unchanged WoW. Who benefited as a nice little windwall is DWF the MM who’s also investor in the project and had supported the token during sell off i.e. bought them on the cheap and now able to sell back higher. Only in crypto things like this happen. We see a pattern here though that hackers are increasingly returning full amounts of the hack without us know what backdoor negotiations happened. Potentially this indicated that the pragmatic 10% bounty rule is is coming to an end because we also see regulators and law enforcement clearly not taking such agreement into consideration when ruling.
Coinbase to launch Gold and Oil Futures while CME looking at spot BTC
We know which of the two is the larger institution but it’s symbolic of the convergence. In the week where we got SEC giving a de facto nod to spot ETH ETFs we have Coinbase looking to venture out and lure in non-crypto native of course expanding into the regulatorily ‘easiest’ assets i.e. commodities. It’s an interesting play and showing also the strength of their current balance sheet exploring further business opportunities outside of their core competence. Same time we have the CME looking to offer spot BTC directly competing with crypto native CEX and of course playing the US regulated card most likely fishing in Coinbases territory. We are continuing to see a convergence of TradFi and Crypot native players and the recent regulatory bills in the US could pave the way for even more of that. The Senate recently passed a resolution overturning an SEC accounting rule that required banks to hold crypto asset under custody on their own balance sheets thereby in essence making it prohibitively expensive for banks to custody crypto and de facto outlawing such practices.
QUOTES:
Historic vote today on the FIT21 bill in the House of Representatives, that will finally start to create some clear rules to regulate crypto (if it becomes law). Americans want to know their representatives are protecting their rights to use crypto, creating clear rules to protect consumers, and won’t let the lack of clarity be weaponized by a few activists in the administration trying to unlawfully kill an industry. Democracy is working. Call or email your representatives
Brian Armstrong — Coinbase CEO
It feels like someone at the Biden White House made a call and said ‘Guys, we can’t be the party against crypto anymore’.
Mike Novogratz — Galaxy Digital CEO
Together with Justin Drake, I have recently decided to become an advisor to Eigenlayer, on the same conditions — I am taking this position personally, not representing the Ethereum Foundation, and with a focus on risks and decentralization. I am therefore fully expected to take contrarian views on Eigenlayer. I do receive a significant amount of tokens from this position. I do not believe that they will change or influence my positions on how the core protocol should be developed, but I believe that the community should know about this, so that they can keep me accountable.
Dankrad Feist — Ethereum Researcher
