What's on Your Mind: BTC/ETH ETF

Ram Ahluwalia, Justin Guilder, James Seyyfart and Nick Rygiel

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Episode Description

Join Justin, & Ram, as they discuss the timing of the Bitcoin ETF, Ethereum ETF, and digital assets landscape.

Episode Transcript

[00:00:00] All right. Here we are. It's Friday. We've got another what's on your mind. Justin and I are pleased to host James from Bloomberg intelligence who covers ETFs and Nick Rigel from Ironclad financials an advisor folks on digital assets. How's everyone doing? What a past few days and weeks.

I'll tell you this. I was at a conference yesterday. It's an LW3 conference in New York. And, my daughter woke me up at 2 a. m. so I hadn't slept well, and so on Twitter, I was visiting violence against stocks like BeyondMe and SoFi, on account of that, unfortunately, and by the afternoon, the Ethereum ETF news hits, And you could see the energy and the vibe at this conference, which was folks in digital assets, just change.

It wasn't a bullion, but it wasn't bubbly either, [00:01:00] but there was in step. So that was my kind of experience of that. What are your all's reactions to what's been happening out there? Any which way you want to go. James, you want to start? Yeah. So I, the first news was that they registered the trust in Delaware, right?

So I was like, huh, somebody jumped this and you could see the price like immediately moving and actually started moving a few minutes before I saw it. I saw it right at just after 10 a. m., like 1001 a. m. essentially. And it was tweeted at 10, but like the price was moving. 10 12 minutes before that and very divergent from Bitcoin itself.

So that was the first news and then we got confirmation they followed the 19B4, which is that regulatory filing where all these issuers, they need to basically file for a rule change to list these types of things, specifically Bitcoin and ETH. ETFs in this case. And they filed it. So last time they, when they registered the iShares Bitcoin Trust, they didn't file that 90 before for seven days.[00:02:00] 

So I didn't see it till June, whatever it was, June 15th or so. And it was filed with the Delaware, um, to make the trust in Delaware on June 8th. So I, part of me wonders if they would have actually filed that 19 before yesterday, after market close if it hadn't made such a big stink on Twitter and basically everywhere, every media source was covering it.

So that, yeah, but it was obviously big news to be honest for me. I've been saying this and I've said this in multiple cases. I'm not surprised at all. I was expecting this to happen, maybe not necessarily right now, but I thought it was going to happen within the next couple of months almost, I would have bet my life on it not at all surprising to me, but surprising how it came out, is how I would say it.

Totally agree. This is highly telegraphed, to your point, Coindesk was covering this, we all knew the Ethereum ETF was coming, here it is, and the price moved, and, for the last month and a half, people are complaining about, Ethereum price is not keeping up and now it's closed the relative gap and still moving today.

Nick, what's your perspective? Yeah, it's one of those things where you [00:03:00] I think James is right. There's an expectation, so it's not a surprise that it's happening, but it's also a surprise that it's, oh, it's actually happening now. So it gives more of the. What are the next steps?

And I think it it does wake up people now to actually saying there's something viable here and there's something that we should maybe take a look at, and I'm sure it just brings people's questions up to mind and it moves the conversation forward.

Absolutely. Absolutely. Justin, any reactions? I think there's an interesting psychological component at play in terms of markets moving, right? Everybody knew an Ethereum ETF would be proposed in the future. Everybody. And yet, the prices moved when these things were announced. I there's still no ETF, right?

There's no Bitcoin ETF, there's no ETH ETF, and yet just the announcement that these things are going to come in the future is moving prices, which I think is, [00:04:00] I'd like to understand why who's buying it as a result of that, and then who's going to be buying it as a result of the ETF actually getting approved by the SEC in 2024, assuming that happens, because it's not really any different than it was And then the markets reacted to this action.

So I'm just always curious by that human psychological behavior. The other thing I would point out here is this is the fifth or sixth filing here for these ETH ETFs, right? So Invesco Galaxy already filed for one, Grayscale filed to convert ETHE and then ARK and 20 ARK and 21 shares alongside VanEck filed way back in.

early September for these things. So this isn't the first first of all, this isn't the first ever. There's been multiple, just like Bitcoin ETS, people have tried to launch these in the past, but this isn't even the first in this wave. We already have deadlines that we know are hard concrete on ARK and BANEC at the end of May.

So we already know [00:05:00] the ultimate deadlines for these 19b4 applications. I think it's just, It's the name. It's BlackRock. BlackRock entering space is what everyone's seeing. And I think there was a lot of people out there that didn't realize that this race has already started as of basically early September.

Absolutely fully agree. Here. I'm about to share my screen here, showing the discount to NAV, which has come in on the Ethereum trust as well. It's down about, by the way, Ram, as you pull that up, I think that 16% of the discount NAV is 16%. Or so now. Yeah, go ahead. Oh, I was going to say, as you pull that up, I think James made a point that is relevant to the things that we've been talking about, which is brand.

Brand matters, right? Like we've talked about it in other contexts, there's brands that are growing, there's brands that are dying. BlackRock has a brand.

Absolutely. Bitcoin is king of digital assets and BlackRock is king of asset management. So when [00:06:00] the king moves, everyone follows and that's what's happening here. What's interesting about, Ethereum was getting a lot of criticism from holders because it wasn't responding to price action.

Our expression had been around ETHE because of the discount to NAV, which has rallied dramatically even before the announcement. This had gone up 40 percent in just the two month period from August to September and through a bit of October as well. This instrument has gone up over 200 percent year to date.

I've said it before, we're going to miss when these discounts close and they will close when those ETFs are launched. But the opportunity is getting narrower and narrower. Here's GBTC, which has also been a compelling opportunity. It's got about, about 11 percent discount to NAV here as well.

On November 16th, almost a year to the week, these discounts were around 43%. Of course, that's during the events surrounding Genesis. And all the rest. So I think that's one of the [00:07:00] reasons why Ethereum hadn't performed is that people were focusing on the Grayscale products because it could get functionally similar spot exposure, but through a cheaper expression.

So that marginal dollar flowed into that product. That discount to NAD was closing gradually over time and expressed in the underlying spot commodity, which is Ethereum, right? But James, what do you see on the outlook for timing of a Bitcoin ETF timing for Ethereum ETF? I'm hearing a lot of chatter around January.

I know it's moving target. I know you're on top of it. What's your perspective? Yeah. Our, we haven't really changed our tune since essentially August. We've been 75 percent by year end. We moved to 90 percent by January 10th, which is that ARK and 21 shares deadline. They were the first filer.

They're the first ultimate deadline. There's all these deadlines in between that I'm going to keep saying when I'm talking here. So I apologize in advance, but there, there's all these debt these dates and the SEC either has to approve, delay, or [00:08:00] deny. They can only approve or deny on January 10th, so we, I personally don't think the SEC is going to be able to deny these 19B4s, those specific rule change proposals I spoke about.

I don't think they'll be able to deny in January. Now, again, these are deadlines, right? The SEC can go as early as they want. We saw them go massively early on a bunch of this in the end of September, right before we were looking at a potential government shutdown, the SEC just like that. Basically cleared the slate and stuff that wasn't due until November was decided on.

So they delayed on a whole bunch of stuff. But right now we've just entered a window where when the coin telegraph tweet went out that it was approved, it couldn't have actually been approved as Joe Kala Saur. point it out. I'm probably butchering his name. I'm sorry, but he's been saying the whole time this never could have happened because they were still in the comment period.

So essentially once these delays happen, you can be, they open it up for public comment. So anyone can go in and put their name or a fake name really and say whatever they want about those proposals. And then there's also a period where the SEC can do a rebuttal comments, but essentially that period ended on November 8th.

Starting yesterday is this period, a window, [00:09:00] where all 12 applicants for the SpotBitcoin ETF could theoretically be approved if the SEC wants everyone to go at the same time. We saw them do that with ETH Futures ETFs. We've been saying at Bloomberg Intelligence that's what the SEC was going to do because that's what the SEC has been signaling to issuers.

They don't want to be, play kingmaker like they did with BIDO the ProShares Bitcoin Futures ETF. Right now we're in this small little window. November 17th, there's two ETS that are up for a decision it's Hashtags and Franklin Franklin Templeton, they're up, they're going to have to delay by November 17th, and Global X is due for a decision, likely a delay or possibly approval on November 21st, and essentially there's this window right now where they can approve all of them at once under the 19B4 process.

I think it's unlikely, I don't think the SEC is ready to do it yet, but theoretically they 19B4 process. The thing that most people are missing is there's also this other process that needs to be completed, the prospectuses need sign off from the SEC. These S1s, these amendments that I've tweeted out and other people have been talking about, it's basically, they're dealing with a separate division of the SEC, which has never happened before, which is part of the reason why we went to 90 percent by [00:10:00] January 10th, because The division of corporate finance has never really talked to these Bitcoin ETF issuers before this.

So that's why we're confident because this is completely new. Like this is something that has never happened before. So we think that process needs to be completed. So we could end up in a situation where these things are approved on the 19B4, but still not ready to launch because they don't have sign off from the Division of Corporate Finance on their prospectuses.

So that's where we're at with the ETF. So we, I do think the approval's going to happen by January 10th. The launch might not necessarily happen right when those approvals happen because you'd need both the approval from the Division of Trading and Markets on those 19 B4s and you'd need approval from the division of corporate finance on the S1s or S3s in Grayscale's case for GBTC.

And then you asked about Ethereum ETFs. I said that VanEck and ARK filed September 6th, I think, or early September. I don't know the, I don't remember the exact date, but their ultimate deadline is the end of May. I think the odds are pretty decent that the SEC will approve them, because the process for SPOT, where we got to now, is CME [00:11:00] launched Bitcoin Futures, then we got Bitcoin Futures ETFs, now we have leveraged Bitcoin Futures ETFs, and now we're looking at SPOT.