Date: 08/16/2023
Author: Mr. X
It’s been a difficult few days for Bitcoin. The Federal Reserve’s recent minutes showed that the central bank is determined to resist inflation, even if that means another potentially ruinous interest rate increase. Though we often forget it, the original premise of Bitcoin was that it was a universal way to fight both inflation and the machinations of central banks. If the Fed seems willing to prioritize fighting inflation over other considerations, that makes BTC much less attractive, especially as Bitcoin has hardly become easier to use. It’s not surprising that Bitcoin began to decline.
However, the truly big signal was that SpaceX and Tesla had reportedly liquidated some of all of their holdings. Elon Musk has had a… complex relationship with the crypto community, especially given his controversial shilling for dogecoin. Yet when it came out that Tesla was holding significant assets in Bitcoin, that was seen as a milestone for the currency. If Musk is giving up on it, BTC moves back to the margins. Bitcoin has fallen by more than 10% in the last five days (as of this writing) and has been flirting with just $26,000.
Yet as BTC falls, ETH may be on the brink of a breakout. To be sure, Ether hasn’t been doing much better – down about 9.4% over the last five days. However, the Securities and Exchange Commission is reportedly poised to allow the first Exchange-Traded Funds (ETFs) for futures on Ether. Bloomberg recently reported that the agency is unlikely to block these funds from sale and they could be available as soon as October.
Numerous companies have been lining up to sell such products – including Volatility Shares, Bitwise, VanEck (of course), Roundhill, ProShares, and GrayScale. Volatility Shares Ether Strategy ETF was first, coming from a filing on July 28. The others had stepped up by August 1.
Considering the SEC’s recent lawsuits against Ripple and its skepticism of direct sales to the public, this may sound surprising. However, it is a bit unfair to say that the SEC is simply “anti-crypto.” One could charge, accurately, that the agency has provided insufficient regulatory guidance. Some people on the Hill have made the same case.
However, the truth is that the SEC is simply behaving in the typical manner of any government agency. It is trying to secure the maximum scope for its remit. It wants to put crypto under its authority, not necessarily ban it. In fact, banning it works against its bureaucratic interest because it eliminates a sphere for the exercise of power. Similarly, approving Ether ETFs (and potentially others in the future) means that the SEC now has unquestionable authority over what is likely to be one of the most influential parts of the crypto marketplace.
If they are approved, it will provide a significant boost to Ether’s legitimacy and probably a short-term price boost. At the same time, it will give the SEC more power over the sector – potentially undermining the whole point of crypto according to theorists. We may soon see a simple choice – is crypto a way of undermining the system or making money within it? I expect most will choose the latter.
Mr. X is an investment analyst working in the Washington DC area who specializes in the intersection of business and public policy. After fifteen years working in politics, he writes on a classified basis for RogueInvesting.com to bring you news on what those with power are debating, planning, and doing
