The Dawn of a New Era
Spot Bitcoin ETFs and the Fight for Financial Sovereignty
Introduction:
In the financial world, a transformative wave is imminent. The US Securities and Exchange Commission (SEC) is considering 13 spot bitcoin ETF proposals, each marked by its unique ticker. These decisions, (due by January 10 for the Ark Invest application), represent a crucial juncture not only in the integration of Bitcoin into mainstream investment but also in the broader narrative of financial sovereignty amidst escalating regulatory battles and accusations from traditional banking leaders.
The Vanguard of Bitcoin ETFs:
Grayscale Investments (GBTC): Grayscale's significant legal victory against the SEC has set a precedent, boosting optimism for the entire sector. Their potential transition to an ETF on NYSE Arca marks a major step toward Bitcoin's institutionalization.
Ark Invest and 21Shares (ARKB): Despite initial setbacks with the SEC, their persistent refiling exemplifies dedication to integrating Bitcoin into mainstream finance. They continue to navigate the regulatory landscape with tenacity.
BlackRock (IBTC): As a financial powerhouse, BlackRock’s entry into the spot bitcoin ETF race with IBTC, planned for Nasdaq, is a strong indicator of Bitcoin's appeal in conventional investment realms.
Bitwise (BITB): Bitwise’s adaptation to SEC requirements and the revised BITB proposal for NYSE Arca trading showcases resilience and an understanding of the regulatory nuances.
VanEck (HODL): VanEck’s choice of Gemini Trust Company as custodian and the creative ticker 'HODL' demonstrate an innovative approach that aligns with the regulatory framework.
WisdomTree (BTCW): WisdomTree has shown adaptability in its strategy, continually refining its proposal to align with SEC expectations, aiming for a listing on the Cboe BZK Exchange.
Invesco (BTCO): Invesco, in partnership with Galaxy Digital, reflects a collaborative effort to meet SEC standards for their Cboe BZX listing proposal.
Fidelity (FBTC): Fidelity’s strategy of in-house custody for its Cboe-listed fund FBTC is a strategic move within the existing regulatory environment.
Valkyrie (BRRR): Valkyrie’s revisions and adaptability in response to SEC feedback, along with its playful BRRR ticker for Nasdaq listing, highlight its dynamic approach in the evolving ETF space.
Global X: Aiming for a listing on Cboe, Global X's proposal with Coinbase as custodian represents a blend of traditional financial mechanisms and modern cryptocurrency practices.
Hashdex (DEFI): Hashdex’s approach of blending spot bitcoin and futures ETF under DEFI, for NYSE trading, is a unique strategy within the regulatory landscape.
Franklin Templeton: Their proposal for a Cboe BZX listing signifies a growing trend of traditional financial giants venturing into digital assets, aligning with SEC regulations.
Pando Asset Management: As the newest entrant, Pando’s Cboe listing proposal marks the beginning of its journey in the regulatory landscape.
Navigating Regulatory Waters:
Grayscale's legal victory over the SEC has been particularly impactful, demonstrating that persistence and legal challenge can lead to breakthroughs in regulatory acceptance. This case, along with the ongoing efforts of other contenders, underscores a pivotal moment in the financial world where traditional regulatory boundaries are being tested and reshaped by the emerging digital asset class.
These proposals are more than just financial products; they are part of a larger narrative about Bitcoin’s integration into the mainstream financial system and the struggle for acceptance within a stringent regulatory framework. The SEC’s decisions will not only determine the fate of these individual ETFs but will also set a precedent for how innovative digital assets can be integrated into traditional financial markets.
The Institutional Awakening: Bitcoin's Ascension Beyond ETF Approval
Discussions fixated on ETF approval are overlooking the grander scheme. This isn't merely about transient market reactions or capital influxes. The crux of the matter lies in the burgeoning recognition of Bitcoin ($BTC) as an institutional-grade asset. The landscape is evolving, with entities like pensions, endowments, and insurance investors gearing up for long-term, passive buy-side flows into Bitcoin.
Consider the instance from December 2020, when Mass Mutual made a substantial move by investing $100m in Bitcoin. While this seems colossal, it's just a fraction of their $235b asset pool. This 0.05% allocation into Bitcoin might appear minute, but it's emblematic of a much larger trend.
Institutional investors don’t engage in short-term plays. Their strategies span decades, shaping portfolios for the long haul.
This initial step by Mass Mutual is merely the tip of the iceberg. Countless institutions are reassessing their bond portfolios, which have plummeted significantly from their all-time highs, thereby challenging long-held investment paradigms.
Take Larry Fink’s (Blackrock CEO) nod towards Bitcoin. It's less about him turning into a Bitcoin advocate and more a reflection of the growing demand from clients, seeking exposure through vehicles like BlackRock.
The numbers speak for themselves. Passive accumulation from the $69k Bitcoin all-time high would currently net you a +55% gain, whereas a similar strategy in long bonds would result in a -12% loss.
Criticisms around Bitcoin's volatility miss the point. For institutions, a minor allocation to an asset like Bitcoin, intended for long-term holding and boasting an impressive Sharpe ratio, fits comfortably within their risk profile. The evidence is right there in their diverse portfolios.
Additionally:
Bitcoin isn’t vanishing.
It survived the FTX collapse.
Its supply is more tightly held than ever.
The continuous expansion of fiat credit is a stark reality.
Fiscal austerity is conspicuously absent globally.
Bitcoin’s illiquidity means even marginal market entries can significantly drive up its price, prompting institutions to start with modest stakes like 0.05%, followed by steady long-term allocations.
Reinforcing this shift is a change in the narrative around Bitcoin's energy consumption, backed by emerging academic research:
"Bitcoin could support renewable energy development" from Cornell Engineering.
"Leveraging Bitcoin Miners as Flexible Load Resources for Power System Stability and Efficiency" co-authored by a former ERCOT CEO.
"From Mining to Mitigation: How Bitcoin Can Support Renewable Energy Development and Climate Action" from ACS Sustainable Chemistry & Engineering.
We're witnessing a paradigm shift in Bitcoin's role and perception. It’s not just about the ETF; it’s about the underlying reasons propelling its advent. Institutional engagement, long greenlit, is unfolding gradually but unmistakably.
Bitcoin, already a staple in the portfolios of individuals and retail investors, is now drawing institutional players off the sidelines.
The game is changing. Welcome to the new era.
The Battle for Financial Sovereignty:
As these ETFs await the SEC's verdict, a parallel narrative unfolds, underscoring the ongoing struggle for financial sovereignty. Recent statements by prominent banking executives like JP Morgan Chase CEO Jamie Dimon and political figures like Elizabeth Warren have intensified the debate.
Dimon's recent remarks, calling for a ban on Bitcoin, citing its use for criminal activities, starkly contrast with the reality of Bitcoin's predominant use as a long-term savings vehicle. Over 70% of Bitcoin supply remains dormant, reflecting its role as a hedge against manipulated fiat currencies.
As discussed in previous posts this mainstream media misinformation angle has been thoroughly debunked.
The prevailing notion that cryptocurrency is primarily utilized for criminal activities is substantially a myth, particularly in the current landscape. Cryptocurrencies like Bitcoin do not provide complete anonymity, largely due to the Know-Your-Customer (KYC) policies implemented by most crypto exchanges. Even in the absence of KYC policies, law enforcement agencies can easily track crypto transactions to identify criminal activities, thanks to the transparent and immutable nature of the blockchain.
In contrast to the perception that cryptocurrencies are dominated by illegal activities, the reality is that illicit crypto volumes reached an all-time high of $20.6 billion in 2022, primarily due to sanctioned entities. However, this figure represents only 0.24% of all cryptocurrency activities. When compared to traditional financial systems, where about 2% to 5% of the global GDP ($800 billion to $2 trillion) is laundered, the proportion of illicit activities in crypto is significantly lower.
Moreso who truly bears the label of a criminal, Mr. Jamie Dimon? Reflect upon this: over the past five years, JPMorgan has amassed a staggering total of nearly $39 billion in fines from US regulators and enforcement agencies for a myriad of violations including anti-competitive practices, securities abuses, and other infractions. During this period of legal and ethical lapses, one wonders if any JPMorgan staff resorted to using Bitcoin or other cryptocurrencies in their operations. The irony is palpable – while traditional banking giants face hefty penalties for their questionable practices, the decentralized world of Bitcoin and crypto continues to be scrutinized for its legitimacy.
As the spaceship is taking off one more time we will start reading more of these and even encounter new ones on the extreme side such as this:
This clash isn't just about regulatory compliance or market stability; it's a battle over the control and future of financial systems. With its decentralized nature, Bitcoin challenges the traditional banking sector's dominance, offering an alternative to a system marred by scandals and questionable ethics, as highlighted by JP Morgan's involvement in facilitating Jeffrey Epstein's activities.
Conclusion: Embracing a New Financial Frontier
As we witness the SEC's decision on Bitcoin ETFs, we are not merely observing regulatory shifts but the dawn of a new era in finance. This movement transcends traditional boundaries, heralding Bitcoin's rise as an institutional asset and challenging long-held financial paradigms. In the words of Friedrich Hayek, a luminary in Austrian economics:
"We shall not grow wiser before we learn that much that we have done was very foolish."
As institutions reassess their portfolios, embracing Bitcoin's potential, we see a transformative blend of innovation and tradition, leading us into an uncharted but promising financial frontier. In this new chapter, Bitcoin is not just an alternative asset, but a cornerstone of the evolving world of finance.