Ep 21 - September 11, 2024 - $IBIT at 2%
Welcome to another episode of the weekly crypto check-in recorded on September 11th 2024. I'm host Robert Swartell, and I'm joined by my co host Andres Sundate. How's it going, Andres?
Andrew Sandate:Good, Robert. I am, in Nashville here at the annual FactRight due diligence conference as I was telling you before we went live. Yep. And not a lot, on the crypto front here at the conference. Gonna be a lot more other alternatives that we're talking about over the next couple days, but, it's good to see you.
Robert Swarthout:Yeah. Good to see you. And, is there any sign still up in Nashville from the Bitcoin conference that was in July?
Andrew Sandate:You know, I I came straight into the hotel. I am, I am eager to walk around and see, if, if there's any remnants left over. I tell you, Nashville, as everybody knows, that just follows kinda what what's booming and what's hot. Like, it's Yeah. Crazy crazy how how much developments happened here over the last 10 years.
Andrew Sandate:But, yeah, I'll be looking out for the the Bitcoins. Yeah. The remnants of the Bitcoins.
Robert Swarthout:Yeah. I imagine they've got all that cleaned up, but you never know. So kinda jump in here. Our first topic is the SEC has warned the FTX estate, about stablecoin usage, and specifically, they warned them about using that for disbursements to clients. It's just mind blowing, that they're doing this.
Robert Swarthout:Stablecoins are cash equivalent. People were in crypto. To literally, in almost all cases, for people to get stuff on FTX, if they didn't already have crypto, then they were probably sending Stablecoin there. And ironically, the f t, the SEC tried this in the, Voyager bankruptcy and also got smacked down by the court. So they're trying strategy that they already got in trouble for.
Robert Swarthout:It's just, you know, it's kind of ironic because it's more of the why provide clarity to the market, when threats and, other things like that will will do is, I guess, strategy. It's just it was surprising to see this headline. I kinda thought this was just gonna kind of, you know, go away quietly, but apparently not.
Andrew Sandate:Yeah. I mean, it's as unfortunately, it's it's more of the same. Right? What we've talked about for months, on on these, market updates, the position of the SEC. I mean, I was I know that we're, you know, going towards a a big election, in November.
Andrew Sandate:There's a lot of, you know, there's a lot of talk about crypto and digital assets being a a an issue that could decide, you know, which direction voters go.
Robert Swarthout:Mhmm.
Andrew Sandate:I was really hoping you know, you've been in this space longer, but I was really hoping that we would start to see more around, you know, what's 25 gonna look like in terms of legislation. And feel like we get a little bit of excitement, and we get a little bit of talk, and then, you know, it's sort of back to business as usual. And the only real actor, that's making any kind of headlines is, you know, the SEC.
Robert Swarthout:Right. And, you know, I was actually talking to someone this morning about this because they were like, you know, you were kinda mixing in the whole political thing. It's like, you know, even if, say, Trump wins the election and the Republicans get control of the house and the senate, which they did with this first term. Right? It still took them 2 years to get a tax bill out.
Robert Swarthout:It's not like things are gonna magically just happen super quick. So we still could be on an elongated timeline even if, you know, your favorite party wins everything. I don't know. It's, I'm trying to be cautiously optimistic, but more cautious than optimistic probably. So, so our next topic, I found fascinating.
Robert Swarthout:So we've talked a little bit about this already, but Ripple will be launching a stable coin on the XRP ledger that also bridges over to Ethereum. They're calling it r l USD is the tote is the ticker for for that particular token, and it's gonna be a very similar structure that you have with, Tether or probably more specifically with USDC and Circle. The the part that is interesting is you start thinking about how good these businesses are. In the headline that I couldn't find, but I remember the pieces that I think that are important, is last year, Tether showed 6,000,000,000 in change of profits with, like, 40 employees. The biggest stable going out there.
Robert Swarthout:Obviously, interest rates being high is driving that. BlackRock, with all their employees and all their products, they had a $5,000,000,000 profit. Is this crazy how different things can be with with the right kind you know, the the right asset at the right time? I think it's the best way to say it. So Ripple getting in the game, I I don't necessarily think it's as much of they're trying to get into the game because they see how good it is for Tether, but more so I think they want a solid stable coin on the XRP Ledger.
Robert Swarthout:And, they say it's coming in weeks. My guess is between now and the middle of October when they have their big conference, probably leading up to that, we'll have launch so they can talk about something around it. But it's, you know, we'll we'll be interested to kinda see the uptick in how fast that one grows or doesn't grow.
Andrew Sandate:The you know, there was a lot of talk in Europe, maybe back to the spring and summer about some of the Stablecoin, like, legislation there. Have you followed that, I guess, that that space in that market? Because, you know, we we all know Mhmm. European legislate legislative agenda and, in and around and as it pertains to crypto and digital assets just seems far ahead of where we're at in the US, and we expected that legislation here would start with stable coins. I I know there's still things happening around projects like ripples, but where are they in Europe?
Robert Swarthout:Well, they're to say they're much further ahead is easy because the US has nothing. Yeah. We're at 0. You're right. But they but they do have a framework that I think has been in place since January 1st or July 1st.
Robert Swarthout:1 or 2. It's MICA, m I c a. It does handles, cover stable coins. And I know that there's some exchanges in some jurisdictions that are not supporting Tether, because it's not MICA compliant. I don't know the exact ins and outs of why it is or is not compliant.
Robert Swarthout:I just know that I remember seeing some headlines, I wanna say late spring, early summer, around Uphold if you were a UK customer that you would no longer be able to transact in, USTT. You know, USTT could this has come a long way. There used to be no transparency at all. They were like, trust us. We do our own audits ourself, which obviously is not an audit.
Robert Swarthout:And then they have become more transparent, but I don't think they're at the full depth and breadth that, at least the EU regulators want to see.
Andrew Sandate:Yeah.
Robert Swarthout:Yeah. But, yeah, you know, it's you have good regulations there. You got good regulations in, Japan, Singapore, the EU UAE, and, Middle East in general is, you know, all all the people that want to be the financial centers of the next 100 years are, you know, oddly enough ahead of the US here. So here
Andrew Sandate:we are. Yeah. I they've made the they they being those, those countries and the stakeholders have have clearly made the determination that we can either, protect our turf, you know, in our little agency or our, our budget, or we can sort of think about collaborating, getting our, getting our, different branches of government, different regulatory, agencies all aligned around this, and then go, you know, frankly, just capture market share and, create jobs. So it seems like that's what they're doing.
Robert Swarthout:Yep. And maybe the US can get its head screwed on straight and try to do the same. So staying on the topic of ripple, it brings us to our 3rd topic here. So kinda going back to the, the SECB Ripple case. We know back roughly a month ago, that's when judge Torres did her final, resolution where she basically said Ripple had to pay a $125,000,000.
Robert Swarthout:At that point, either side could start their appeals process to file. They had 60 days to do so. Ripple said publicly that they don't plan to. The SEC has not been as clear, on that topic, but it seems like they won't appeal. That that would be where I place my bet at this point.
Robert Swarthout:But the news item here is Ripple has asked because they had 30 Ripple had 30 days to, send to the SEC, their penalty. Or, actually, I don't know if it's the SEC. Send it somewhere. It's it's not their money anymore. And they, have asked they requested to the court, and the SEC consented to say that Ripple would have 30 days past the resolution of the case or past the end of the 60 day window if nobody appeals.
Robert Swarthout:It's a smart business here. I mean, nobody wants to spend a $125,000,000 and then find out the other side's gonna appeal, then that money's hung up. So, you know, I this case is slowly going away, it seems, but, we are added drama here at the end, I suppose.
Andrew Sandate:Yeah. Yeah. Yeah. It seems like it's just a matter of, when, not not if here. So
Robert Swarthout:Yeah. I mean, in the middle, I mean, $125,000,000 makes decent interest these days if you can keep it for a couple Yes. So it's, it's real money. Our next topic, you know, this is not something that everybody will use, but I I found it cool because this is showing yet another way that crypto is creeping into the financial system, the mainstream financial system. So Mastercard is launching a Bitcoin card.
Robert Swarthout:That was the headline. And people are like, oh my gosh. It's cool. You'll be able to literally take your Mastercard anywhere that you normally can use a Mastercard, swipe, and at transaction time, they do that they, behind the scenes. The merchant has no idea you're spending Bitcoin.
Robert Swarthout:They they do the conversion. I guess if there's a sticker on this one at all, it is you know, it's to get the card, it's €1.6. Okay? No big deal. It's €1 monthly maintenance fee.
Robert Swarthout:So that's, you know, Adalmis starts to feel somewhat like a credit card, in the sense there's the these fees. And then you have a, just shy of 1% transaction fee 0.95. And that's not too bad. I mean, you go to Coinbase and other places, you're gonna be paying 1, 1 and a half percent, as a transaction fee. But if you think about it, every time you transact, with your card, you're getting the fee, You know, it could add up over time.
Robert Swarthout:But it's cool that Mastercard's trying this and, trying to reach out, but they they claim it'll be available and usable at a 100,000,000 merchant wide. So
Andrew Sandate:Yeah. So you mentioned Europe. Are they starting the rollout there?
Robert Swarthout:I I again, I think it's because the regulations. Right? It's clearly Yeah. Because, you know, in the US, you probably would have the ACC knocking on your door the next day saying, hey. You're selling securities.
Robert Swarthout:Yeah. Yeah. Or you're transacting in securities, and you probably need some license to do that. So, yeah, it's I've only see they haven't said it's only Europe, but I've only ever seen pricing in euros. So it kinda leads you down that path.
Andrew Sandate:So what maybe we could talk about the mechanics. So this would be for somebody who is, obviously, willing to open up a card with Mastercard. They have a crypto wallet. They taught they that crypto wallet, the idea is they go, swipe the card, or, use the card, and instantly, there's verification that there's there's Bitcoin in
Robert Swarthout:that wallet? Here is the users get to control the Bitcoin in their own wallet is Okay. My understanding. It's not like you're sending it to Mastercard and they're they're having it as collateral. At the end of the day, it's purely like you're slowly whittling away at your Bitcoin, which is pretty cool.
Andrew Sandate:Yeah. Interesting. Yeah. That raises a lot of, I don't know, just sort of I'm studying for the CFP right now, and there's a whole growing, section of study around, all the research, you know, behavioral finance effectively, and the just the whole idea around how somebody is deciding which form of payment to use. And, a lot of questions around their view of of Bitcoin, there's a lot of sort of behavior and psychology that I think goes into this because it's it's different than your typical fiat, approach, right, to Absolutely.
Andrew Sandate:A normal transaction.
Robert Swarthout:It's a no. To the to the end merchants, it's a normal transaction. To you, there's a lot of other stuff in your head. Right? I mean, you're spending an asset that's volatile.
Robert Swarthout:So the idea that you're out buying coffee, I this this goes back to we've talked about this many times. Like, are people willing to transact with crypto that's outside of a stable coin because that's you may send go to Starbucks and buy an 8 or $10 equivalent coffee. Well, Bitcoin goes up tomorrow
Andrew Sandate:Right.
Robert Swarthout:50%. All of a sudden, that coffee was 50% more, and you don't need to give it to more of it. Yeah.
Andrew Sandate:It's a $14 coffee, and you threw a cup away to get a refill. Right. Well, I told you about doing a a demo with, the the folks at OnRamp. And one of the things that I was thinking about after that call and then slight leading up to this one is, you know, yes, around this idea of utility. Right?
Andrew Sandate:And we kinda go back to what we've talked about for some time now at Teton, which is what is the utility around these digital assets. And, you know, obviously, everybody talks mostly about Bitcoin and mostly about Ethereum. And the the whole idea of is there a utility when you start to talk to all the folks in this ecosystem? They call it the industry. Right?
Andrew Sandate:So the asset managers, these professional service firms, custodians, all these providers of services who are generally starting in many cases, you know, if they're thinking about retail, meaning the individual investor, like, they're typically starting with something around Bitcoin, or services to support your Bitcoin, whether it be custody or, wallets, etcetera. And then, you know, the idea is you're gonna hopefully do more. But, yeah, this whole question of, you know, you set up a Mastercard, is somebody gonna go and when the whole idea around Bitcoin is I'm never selling for some people. Like, it's like, I've heard this analogy of it's it's like owning, you know, Midtown Manhattan. Like, you you would never wanna sell that.
Andrew Sandate:Like, if you own real estate Midtown Manhattan, you would just hold it Right. Long term. You know? And so this idea that, no, you know, there's actually the ability to go and, you know, buy dinner or pay for a movie. Yeah.
Andrew Sandate:So, yeah, it'll be interesting to see this project and how it how it goes.
Robert Swarthout:Yeah. You know, and it could be a test. It could be a real thing. But it starts to, you know, allow people the thought of being sovereign with their money. Yeah.
Robert Swarthout:You know? There's not too much freedom as it is now, but, starting to be able to use crypto in those kind of cases. You know, I to me, I what's what is a much better example is, you know, just being able to transact in whatever you want. The merchant doesn't care, and they get what they want. That that to me is becomes a crypto world.
Robert Swarthout:And it you know, if you're a world traveler, you don't have to worry about what currency they care about and it just happens. So Yeah. We are
Andrew Sandate:You're not you're not stopping at the window at the airport. It's got Right.
Robert Swarthout:Or to
Andrew Sandate:get currencies.
Robert Swarthout:They get ripped off. Yeah.
Andrew Sandate:You pay 40% in fees.
Robert Swarthout:Yeah. You you you, knowingly walk up to get ripped off. Yeah. It's, those days are maybe coming to an end. Yeah.
Robert Swarthout:They probably in the more distant future, but they certainly can happen. So, our next topic, is kinda kinda a bit of a reflection. So the Bitcoin and Ethereum ETFs about for, you know, couple months or most of the year if in Bitcoin's case. And, admittedly, we've kind of hinted at this on a couple other episodes, but they couldn't be more different in their performance, you know. Even if you look at now, Bitcoin is up 30% since its ETF launched, and Ethereum is down 30%.
Robert Swarthout:So, you know, that's more of the whole market. Crypto goes how the stock market goes. If if there's not expansion happening in the stock market, crypto is not gonna do well. It seems to be basically directly correlated to that. And, but, you know, if you put a stake in the sand right now, obviously, maybe the Ethereum launch wasn't the best time.
Robert Swarthout:But the the excuse me. The Ethereum one also has the problem of it doesn't have a marketing plan, besides this being second to market. So
Andrew Sandate:Yeah. Yeah. Yeah. Yeah. I mean, it I mean, the welcome to the volatile world of of crypto.
Andrew Sandate:Right? I mean, if you're I mean, you couldn't like you said, you couldn't couldn't have more sort of opposite extremes. And and there's no way that you can look at, you can't look at these and say, you know, like, much of the stock market today or at least the S and P 500, much of it is dominated by the performance of a handful of sort of mega cap now. Not even large cap, but just mega cap technology companies. You know?
Robert Swarthout:Mhmm.
Andrew Sandate:And so when but when you look at, you know, the the 2 giant mega caps, if you will, in crypto, In terms of, you know, if you talk about it in market cap terms, Bitcoin, Ethereum, the performance is, totally asymmetric. Like Yeah. It it I don't know what NVIDIA's chart looks like so far this year. I assume it's up into the right, and percentage wise, it's probably one of the best performing stocks, if not
Robert Swarthout:The best. Yeah.
Andrew Sandate:The most yeah. The the best performing stock of those mega caps, but I would also think that, you know, the other ones, Meta, Google, Amazon, others are probably having a a, you know, pretty solid years as well. Not the case with crypto.
Robert Swarthout:Correct. You know, and, you know, the conversation I was having this morning, I was telling the guy that I think that if this was a normal bull market cycle, we would potentially be doing better than we are right now. I just think that this political season has been so crazy, and it has taken up all the news. And you had this buildup of 4 years of the SEC acting like they have with crypto. Well, not just the SEC, but, you know, the government general.
Robert Swarthout:And it's kind of a wait and see approach, I think, that's kinda happening in cryptos. You know? I guess everyone's probably ready for November to be here, and, I think the crypto feel like,
Andrew Sandate:yeah, I'm gonna be devil's advocate for a minute, but I I feel like there's a lot of this is gonna be different in crypto. Like, if we could just get legislation or if we could just get regulatory clarity, in your, you know, in your experience and in the time you've been in crypto and looking at these cycles is, you know, everybody was saying, well, maybe when the ETFs open up, and that's gonna bring a bunch of new capital into the space, or maybe when we get past FDX and all the the the scams. Has the has has the legislation or the lack of regulation been there all along as the single big driving issue to increase adoption, to increase liquidity and capital into the into the space?
Robert Swarthout:I would say so, but, like, it ebbs and flows how big of a headline it is. Yeah. But it's it's certainly probably always been the top three headlines if you kind of took a sample of stuff. Yeah. At least in my perspective, all the good things that crypto has a promise for will not happen with that regulation.
Robert Swarthout:You can have all the meme coins, all that kind of stuff, but you don't need a meme coin to have regulation. It is what it is. But for some of these other tokens to be used and touched by businesses or, you know, used to improve the back office efficiency for something that's retail focused, at the end of the day, it's, regulation that's holding it up. And then you magnify that with what's happened in the last three and a half years with this administration and their attack on crypto, specifically the SEC, and then you got TrickPoint 2.0 that still continues to happen. It's it's an assault on an industry that's, admittedly I don't know if there's a great example of something else that's happened like that in the past, to
Andrew Sandate:either Yeah. I mean, I I I know you have long been in technology and and built multiple businesses in software, And so I highly value your perspective and and certainly your experience much, much greater than mine in this domain. But my question would be, when the Internet initially was in its, you know, very early stages. I mean, it was a government research project, and then it grew from
Robert Swarthout:Al Gore invented
Andrew Sandate:it. Right. And then Al Gore invented it. And then we we really consumers, like mainstream folks really started to sort of experience the Internet in the nineties. Right?
Robert Swarthout:Yeah. Late nineties. Yeah.
Andrew Sandate:Mid mid mid to late nineties. And then things really took off and accelerated in, like, a 2 year period. You know? Yeah. Several year period.
Andrew Sandate:And then you fast forward 20 years or so
Robert Swarthout:from, you
Andrew Sandate:know, from the 2,000 dotcom crash. And would you say that regulation, because there was an, a lack of it Mhmm. And the government really stayed out of the way largely with the exception of the big Microsoft case, you know, the antitrust case. Now there's a big you know, a couple of big antitrust cases. But Yep.
Andrew Sandate:Do you think that the Internet and everything around it, all the the growth and everything that's happened as a result of the Internet, social media and web 2.0, is that all because of a lack of regulation, or is it because it's not directly tied to money?
Robert Swarthout:To money. I I probably both.
Andrew Sandate:And the and the lack of yeah. I mean, the lack of, the lack of certainty around is this another FTX, or is this another, you know, Google? And Yeah. And not that Google hasn't made some mistakes, but largely, I mean, those two guys created what we now know is, like, this modern search and and created a advertising behemoth, you know Mhmm. On the backside of that.
Robert Swarthout:Yeah. I yeah. I think it's both. I think it's more so that it wasn't like there was no regulation. Oddly enough, regulators did a very good job in hindsight of being light touch with the regulation Yeah.
Robert Swarthout:And being willing to change over time. But you're right. It didn't it didn't touch money, and that's that maybe is very dear to a to a government. Right? It's it's it's kinda how, in some sense, how it controls people.
Robert Swarthout:So you have that added with it's on top of the Internet and maybe with hindsight, I don't know, it's there's there's, I think, a lot of agendas mixed up in this, unfortunately. Yeah. And you just have a recipe for a, a bit of a negative perfect storm here. So
Andrew Sandate:Yeah. I'm just curious how much this the big giant central players in the global financial system. Right? The giant banks, the giant asset managers, the giant insurance like, if they really got together in a room, you know, I mean, this is not not likely. But you know what I mean?
Andrew Sandate:Like, they wanted to save the global financial system when long term capital management had massive leverage on, you know, for people that don't know that story, it was a hedge fund supposedly, you know, all of it some of the smartest minds in finance got together, started a hedge fund, and it nearly crippled and took down the financial system. And literally, like, 12 guys got together with the Federal Reserve and, like Like, figured out what I remember. Rescue. Yeah. Came up with a rescue plan.
Andrew Sandate:Right? I mean, we we sold some of that in, you know, o eight. Right? Where this, like Yep. They made movies about this shit, like, where people got together and it's like, all of a sudden, okay.
Andrew Sandate:We're gonna rescue Bear Stearns and
Robert Swarthout:Mhmm.
Andrew Sandate:You know, JPMorgan's gonna get, you know, backstop. And it's like I don't know. It seems like harder shit's been figured out. Yeah. But we still continue to feel like take one step forward and, like, one regulator decides, nope.
Andrew Sandate:We're gonna go this direction. I and then, yeah, you throw the political season into that, and it's a it's a recipe for, yeah, for agendas slowing down potential progress, I guess.
Robert Swarthout:Yeah. And I I guess the last thing I would say on this piece is you've had literally the world's biggest asset manager in BlackRock, Larry Fink, leading up to basically, all the way through the end of 23 being crypto is not good, crypto you know, all the negative things, but never said a positive. Then all of a sudden, they were ready. All of a sudden, he is not the biggest Bitcoin, cheerleader, but he's pretty high up the list at this point. Yeah.
Robert Swarthout:And only can say positive things. So I don't know. I've kind of learned to pay attention to what they do, not what they say.
Andrew Sandate:Yeah. Yeah. Like you said. Yeah. We, yeah.
Andrew Sandate:Well, we digress, but I thought it was worthwhile to sort of explore given, you know, the the the political season we're in, but also just, I think you have to take a temperature check every once in a while and say Right. I mean, obviously, we are long term the space and believe the potential of the space. Hopefully, the market begins to recognize things like utility, and over time, you start to see more of these institution institutional type projects grip take grip. But I think, yeah, big uncertainty, of under you know, whether or not regulation provides, whether it's a backstop that companies need or it's certainty. That's a big deal in business.
Robert Swarthout:Yep. Well, I kind of alluded to it, but our last point, BlackRock, the their iBit Bitcoin ETF is now holding 2% of all Bitcoin that will ever be in existence. So, going from not liking Bitcoin to holding 2% in just over 9 just over 8 months is, pretty incredible.
Andrew Sandate:Yeah. What's your what's your take on that?
Robert Swarthout:You know, great marketing, good Salesforce, you know, because their product that they're selling is no different than the other 7 that are out there outside of small difference in fees. But when when you are the biggest name and, I guess, air quotes, most trusted, you you tend to attract a lot, I guess. I don't know.
Andrew Sandate:Yeah. I, yeah, I mentioned to you, I I was on a call earlier this week, start getting more acquainted with platform called OnRamp and some of the things that they provide around custody. And, they also have an asset management business. But as you know, like, running a wealth advisory firm, like, one of the things that I'm trying to do more of is just, like, more ground level research. Because I think, you know, there are people that given all the uncertainty and all the stuff we talked about today, there are people out there who wanna get exposure.
Andrew Sandate:They wanna get exposure, and they there's a lot of different ways now to do that. Obviously, the ETFs, to your point, BlackRock's clearly, won some of those folks over. There's also a variety of other ways to do it. And I think, you know, like, part of me is like, hey. I hope a lot of advisors never do wake up to the potential in this space.
Andrew Sandate:But, I I have a feeling I'll be, you know, that's wishful thinking. Although I do think that there's, the ability to get rewarded for being early. Mhmm. But as a fiduciary, I think your obligation is to be informed. Right?
Andrew Sandate:And and obviously to do no harm. So I think you gotta do the work. But, look, I you know, part of me is, like, you you talk about the space and the potential of the space, and you sort of come back to these themes around when are we gonna get clarity? When are we gonna get regulation? And then I think and and it's could be easy for somebody to say, we're not making headway.
Andrew Sandate:Look at prices. Yeah. You know? But but I think if you also zoom out and you look at what happened with the Internet, you look at what happened with some of these areas, you know, just take AI. I mean, it's on the scene now.
Andrew Sandate:Absolutely. 100 of 1,000,000,000 of dollars being invested. There's pioneers that have been working in that space for decades. Mhmm. And now the mainstream folks, you know, wanna own NVIDIA.
Andrew Sandate:So
Robert Swarthout:Yeah. It's, it's an overnight success.
Andrew Sandate:That's right. We love that, America.
Robert Swarthout:Yes. Yes. That's awesome. Cool. Well, we'll wrap it up here.
Robert Swarthout:So thanks for joining us on this episode of weekly crypto check-in. If you wanna stay updated on future episodes, you can find us in a podcast player by searching Teton Crypto Capital or the weekly crypto check in. Take care.
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