Monday, Nov 13, 2023

a crypto shift of attention, programmable money, and some other crazy things

“There is no force so powerful as an idea whose time has come.” – Everett Dirksen ||    

Hello everyone, and happy Monday! I hope you all managed to recharge this weekend – is it just me, or are events coming at us faster these days?

You’re reading the daily premium Crypto is Macro Now newsletter, where I look at the growing overlap between the crypto and macro landscapes. There’s also usually some market commentary, but NOTHING I say is investment advice. For full disclosure, I have held the same long positions in BTC and ETH for years, and have no intention to either buy more or sell in the near future.

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IN THIS NEWSLETTER:

• BTC vs ETH: A shifting center of gravity?

• Confusion around programmable money

• An official US debt warning

• Conservative politics

WHAT I’M WATCHING:

BTC vs ETH: A shifting center of gravity?

It looks like we will also now soon get ETH spot ETFs.

On Thursday, it was confirmed that BlackRock has filed a proposal with the SEC for an ETH spot ETF, citing similar supporting arguments as for its BTC spot ETF which many (including myself) assume is going to get approved.

This filing is not a surprise. There will be demand, as any institution that gets involved in crypto will probably get exposure to bitcoin first and will then want to start diversifying. And many investors prefer the investment thesis of Ethereum to that of Bitcoin (I touched on this topic in the November 3 episode of the CoinDesk Markets Daily podcast, but I have plenty more to say about the different theses so I’ll be coming back to this in later posts).

And the main arguments for a BTC spot ETF also exist for ETH. There’s the lively derivatives market with reliable-enough pricing and market supervision. The district court’s ruling in the Grayscale suit that it makes no sense to approve a futures ETF without approving a spot ETF (which the SEC has not appealed) would of course also hold for ETH.

The regulatory uncertainty around whether or not ETH is a security shouldn’t matter for ETF approval. Shares in the ETF would obviously be a security, but the classification of the underlying security isn’t relevant. There could be some SEC objection to allowing ETFs to stake ETH and distribute the returns, but that debate is not on the table, for now.

Price reaction

Just like the BTC spot ETF filing moved the BTC price, the latest BlackRock filing did the same for ETH, delivering a strong (and unusual!) outperformance for the second largest crypto asset by market cap.

(chart via TradingView)

A simpler way to track the performance of ETH relative to BTC is via the ratio between the two assets. In the below chart, you can see the ETH move on confirmation of the news, as well as the cooling-off period.