Market Musings – July 14th, 2023

Majors Down In Slow Week, Larry Fink Joins Team Crypto

Bitcoin (BTC) finished the period a touch under $30K – falling ~2.4% on the week. 

On the ETF front, 6 spot BTC ETF applications hit the federal register this week. What does that mean? The clock is officially ticking for the SEC to approve/deny/extend these applications, one of which is Blackrock’s application. 

Bitwise’s application is now second up after Ark Invest/21 Shares. The remaining 5 applications are all tied for third in the queue for an update from the SEC.  Consensus is currently that most of them will be delayed before early September. 

Why? Because that’s what already happened with the Ark Invest/21Shares filing. The SEC extended ~2 weeks before its “first deadline” to get back to them – pushing the date for a next update until August 13th.  

Sidenote: the SEC could blanket deny/ approve/extend all of the ETF applications at once. So, don’t put too much stock in the deadlines above. 

Let’s Not Forget About GBTC

While all eyes are on the new ETF filings, there is still an underappreciated sideshow taking place.  Grayscale, the issuer of the largest Bitcoin fund (GBTC) is still in a lawsuit against the SEC. In June of last year, the company sued the SEC for denying its application to convert GBTC to a spot Bitcoin ETF. A ruling on the case is expected sometime this quarter. 

The good news? Analysts from Bloomberg Intelligence are putting Grayscale’s chance of winning the lawsuit at ~70%.  The bad news? There’s still a chance that the SEC could “drag its feet” and come up with another reason to delay – even if the judge rules in Grayscale’s favor. 

But, as we saw in the Ripple case, anything besides an outright “L” for a crypto company could be something to celebrate. 

Ethereum (ETH) traded above $2K for a brief period this past 7D, but finished the period below $1,900 and down ~2.2%.  

In L2 land, the majors (Arbitrum and Optimism) both saw a strong rally.  Arbitrum’s ARB token was up ~9% over the past 7D while Optimism’s OP token was up ~17%.  

Optimism released a new formal governance structure this week aimed at decentralizing governance via a “two house” token voting and “one-person, one-vote” system.

More on these projects to come in Part 2 of our Look Into L2s series next week. 👀 

Alternative Layer-1 tokens continue to show some signs of life. They outperformed BTC and ETH with a ~3% return over the past 7D. 

Yesterday, Solana announced the launch of Solang – a compiler which will enable apps written in Solidity (Ethereum programming language) to be deployed on Solana. Historically the only apps coded in Rust or C could be easily deployed on Solana. Let the battle for devs continue!  SOL was up ~9% over the past 7D – topping the charts of alternative L1s.

Last week, Polygon announced that it’s planning to replace the network’s native token (MATIC) with a new token called POL. The goal? To make POL an asset which can be used to secure all of Polygon’s different networks (e.g., Polygon PoS Chain, Polygon zkEVM, and application specific blockchains). It sounds like the transition to POL will be long and drawn out – to convert their MATIC to POL, users will need to send their MATIC to an upgrade smart contract. 

DeFi tokens collectively finished the week flat, but there were some bright spots. 

Uniswap, the largest decentralized exchange, unveiled its new UniswapX protocol this week. Features include “better prices” via liquidity aggregation, gas-free swapping, protection against maximal extractable value (MEV), and no cost for failed transactions. The protocol’s UNI token was up ~11% on the week. 

Synthetix, a leading DeFi derivatives platform, announced that it’s now using Chainlink’s recently launched Cross-Chain Interoperability Protocol (CCIP). The initial integration will enable stablecoin transfers between Ethereum and Optimism. The SNX token rallied ~43% over the past 7D. 

And last, but not least… 

Let’s Extend A Warm Welcome To Larry Fink

Please join the Milk Man in giving a warm welcome to crypto’s latest arrival from TradFi: Mr. Larry Fink, everybody 👏!  He’s one of the biggest OG’s in TradFi land.  He co-founded Blackrock way back in the day. In 1988 to be exact ;).  He’s overseen the company’s rise to become the world’s largest asset manager with ~$10T in assets under management.

From cubicle dwellers to corner office hot shots, (pretty much) anyone working on Wall Street would be starstruck if they got to meet him in person.  Like Garth and Wayne meeting Alice Cooper in Wayne’s World – level starstruck. 

Blackrock filing for a spot Bitcoin ETF last month was a big deal. After all, its record for ETF application approvals is 575-1. But let’s be real.  It makes sense for pretty much any asset manager on the hunt for assets (and fees) to file for one. Being a “crypto believer” is not a prerequisite. 

But Larry Fink’s appearance on CNBC last Friday made it clear that he’s more than just a little bullish on the asset class. During the interview, he said that he thinks crypto is “going to transcend any one currency”. Woah, that’s quite a statement.  Can one person making one appearance on TV actually impact a multi-hundred billion dollar asset like Bitcoin?  Over the short term, maybe a little. Probably not much though. 

But getting TradFi leaders on “team crypto” over the long haul has been a big deal in legitimizing the industry. Especially given the fact that top CeFi companies (e.g., FTX, BlockFi, Celsius) have left a major stain on the industry. And especially in the face of the all out war that Gary Gensler and the SEC started waging on crypto this year. 

When Jamie Dimon is (finally) ready, we’ll also happily add him to the list. 

We like all TradFi newcomers. Even if they’ve called Bitcoin a “pet rock” in the past.