BlackRock's Bitcoin ETF Is A "Big Deal", Here's Why | Round Up

Introduction and Vacation Recap

In this section, the hosts introduce themselves and discuss their recent vacation experiences.

Sunny Disposition

• Mark Yusco returns from a two-week vacation with a sunny disposition.

• He shares that he had an amazing time in Spain and Portugal, exploring historical sites and learning about the Templar Knights.

• Mark mentions discovering that banking was invented in Portugal by the monks at a monastery he visited.

Larry Fink's Advocacy for Bitcoin

This section focuses on Larry Fink's recent advocacy for Bitcoin and its impact on the cryptocurrency market.

BlackRock's Spot ETF Application

• BlackRock, the largest asset manager in the world, filed a spot ETF application for Bitcoin.

• This triggered other companies like Fidelity, Invesco, Wisdom Tree, and Bitwise to refile their applications as well.

• Larry Fink openly expressed his positive views on Bitcoin during an interview on CNBC.

• His statements highlighted Bitcoin as a global asset and a hedge against inflation.

Approval of BlackRock's Application

• Mark Yusco believes that BlackRock will likely be approved due to their influence and reputation.

• He predicts that other companies' refiling efforts will be futile as BlackRock will dominate the market initially.

The Inevitability of Bitcoin Adoption

This section discusses the inevitability of Bitcoin adoption due to its technological evolution and advantages over traditional assets like gold.

Technological Evolution

• Mark emphasizes that Bitcoin is not magic internet money but rather an evolution of computing power.

• He compares it to gold, which has been used as money for thousands of years but lacks portability and divisibility.

• Bitcoin offers greater portability and divisibility, making it a more efficient form of digital currency.

The Impact of BlackRock's Entry

• Mark highlights the significance of BlackRock's entry into the cryptocurrency market.

• He dismisses claims that Bitcoin will go to zero and suggests that critics like Nouriel Roubini will have to change their tune.

• Mark views Bitcoin as a better way to store value and believes its adoption is inevitable.

Conclusion

In this Roundup edition, Mark Yusco shares his vacation experiences and discusses the impact of Larry Fink's advocacy for Bitcoin. He emphasizes the inevitability of Bitcoin adoption due to its technological evolution and advantages over traditional assets. With BlackRock's entry into the cryptocurrency market, Mark predicts a significant shift in perception towards Bitcoin.

Approving Multiple ETF Issuers

The discussion revolves around the possibility of approving multiple ETF issuers to avoid favoritism and create a level playing field in the market.

Chance of Approving Multiple ETF Issuers

• There is a concern about approving only one ETF issuer, as it may give the impression of favoritism.

• The idea of approving multiple different ETF issuers is discussed to avoid tipping the scales in favor of one company.

• It is mentioned that this approach was taken with futures, where multiple issuers were approved.

Approval Process Similar to GLD

• The approval process for gold ETFs, specifically GLD, is brought up as an example.

• Currently, there are no real alternatives to GLD in terms of gold ETFs.

• It is suggested that other issuers may be approved in the future, but currently, BlackRock seems to be the main contender.

Other Potential Approvals

• Mentioned companies like Bitwise, Hunter, ARCA, and the twins (Cameron and Tyler Winklevoss) are discussed as potential candidates for approval.

• These companies are seen as reputable and could benefit from getting their ETFs approved.

Speculation on Approval Conditions

• Speculation arises regarding whether there might be a contingent or trial period approval for certain issuers.

• It is uncertain if such conditions can be implemented but not entirely ruled out.

Impact on Barry Silbert's Empire

This section focuses on discussing Barry Silbert's empire and how the approval of an ETF could affect his various businesses.

Overview of DCG Empire

• DCG (Digital Currency Group) founded by Barry Silbert is described as an empire consisting of several businesses.

• Coindesk (a media company), Luno (an exchange), Foundry (a mining company), and Grayscale (owner of GBTC) are mentioned as part of this empire.

• Genesis, another subsidiary of DCG, is highlighted for its past financial troubles.

Uncertainty Surrounding GBTC

• The future of GBTC (Grayscale Bitcoin Trust) is questioned in light of the potential approval of an ETF.

• It is speculated that if an ETF becomes available, investors may choose to move their funds from GBTC to the ETF due to lower fees.

• The impact on Barry Silbert's empire and how much he would need to sell or make deals to sustain it is discussed.

Transitioning from GBTC to ETF

This section explores the possibility of transitioning GBTC into an ETF and potential buyers for the trust.

Transitioning GBTC

• The idea of transitioning GBTC into an ETF is considered.

• Fidelity is mentioned as a potential buyer for GBTC if such a transition were to occur.

• Rumors about negotiations between Fidelity and Grayscale are discussed.

Personal Anecdote

A personal anecdote about socks and pants is shared by one of the speakers.

Sock Reveal

• One speaker mentions not wearing socks but describes Bitcoin bull market socks they would wear if they had them.

Scorpion Pants

• The speaker shares that they have pants with scorpions on them.

• They explain that a friend compared them to a scorpion due to their unpredictability.

Overall Summary:

The transcript discusses the possibility of approving multiple ETF issuers instead of favoring just one. It mentions BlackRock as a strong contender but also highlights other reputable companies like Bitwise, Hunter, ARCA, and the Winklevoss twins. The impact on Barry Silbert's empire, particularly regarding GBTC, is explored, along with the potential transition of GBTC into an ETF. A personal anecdote about socks and pants is also shared.

Hard Work and Approval of GBTC Conversion to ETF

The speaker expresses their admiration for hard work and discusses the delay in approving the conversion of GBTC to an ETF. They mention that they have nothing against it and believe it should have been approved earlier.

Delay in Approval

• The speaker mentions that they don't admire what has happened in the last couple of months regarding the approval process.

• They express their wish for the approval of GBTC conversion to an ETF, stating that it should have happened earlier.

Manipulation Claims and Permissionless Conference

The speaker addresses claims of market manipulation and announces a permissionless conference with Bankless. They highlight the importance of discussing various topics related to DeFi at the conference.

Market Manipulation Claims

• The speaker dismisses claims of market manipulation, comparing it to fines imposed on manipulation in the gold market and equities futures market.

• They emphasize that such claims are exaggerated.

Permissionless Conference Announcement

• The speaker informs listeners about an upcoming permissionless conference held with Bankless.

• They describe it as the biggest and best conference in DeFi, taking place in Austin, Texas from September 11th to 13th.

• The conference will feature a phenomenal lineup of speakers covering various topics such as ZK Tech Roll-Ups and account abstraction.

Discounted Tickets for Listeners

The speaker promotes discounted tickets for podcast listeners attending the permissionless conference. They encourage listeners to take advantage of this opportunity before prices increase.

Discounted Tickets for Listeners

• Listeners are offered a discount by using the code "pods20" when purchasing tickets.

• The speaker urges listeners to click on the provided link to secure their discounted tickets, as prices will rise every two weeks.

SEC Lawsuit and Coinbase's Reputation

The speaker discusses the SEC lawsuit against Coinbase and highlights the reputation of Coinbase as a trusted custodian. They mention that the heat from banks and exchanges is due to Coinbase's competence.

SEC Lawsuit and Reputation

• The speaker mentions that while the SEC is suing Coinbase for being an unregistered broker-dealer, many reputable institutions like BlackRock list Coinbase as their custodian.

• They attribute the backlash against Coinbase to its competence, which threatens incumbents in the industry.

• The speaker emphasizes that this pattern of incumbents persecuting disruptors is not new.

Spot Bitcoin ETF Approval and Potential Demand Increase

The speaker speculates on the potential impact of approving spot Bitcoin ETF applications on demand for Bitcoin. They express optimism about a parabolic price increase in the future.

Potential Demand Increase with Spot Bitcoin ETF Approval

• The speaker believes that approving spot Bitcoin ETF applications would lead to a significant increase in demand for Bitcoin.

• They estimate this increase to be in the hundreds of billions range.

• The limited free float of Bitcoin contributes to its scarcity and potential price appreciation.

• As the price rises, more turnover is expected, especially during periods of emotion, momentum, and FOMO (fear of missing out).

Parabolic Price Increase After Halving

The speaker discusses their belief in a parabolic price increase after each halving event. They mention discussions around mining rewards and fees impacting future price movements.

Parabolic Price Increase After Halving

• The speaker asserts that previous cycles have shown a parabolic price increase after halving events.

• They acknowledge discussions about potential changes in mining rewards due to fees and other factors.

• Despite these discussions, the speaker remains confident in a parabolic price increase, especially when BlackRock's approval as an ETF occurs.

Predictions and Possibility of Bitcoin Price Increase

The speaker reflects on predictions made by Tim Draper and shares their own thoughts on the possibility of a significant Bitcoin price increase.

Predictions and Possibility of Price Increase

• The speaker mentions Tim Draper's prediction of $250k for Bitcoin, which has received some criticism.

• They express that timing predictions can be challenging and mention their own prediction for a significant price increase by the end of 2024.

• While not guaranteeing anything, they believe it is possible based on previous cycles and the potential for Bitcoin to reach gold equivalence.

The transcript provided does not include any timestamps beyond this point.

Bitcoin Fair Value and Historical Context

In this section, the speaker discusses the fair value of Bitcoin and provides historical context to support their viewpoint.

Bitcoin Fair Value

• The speaker mentions that the fair value of Bitcoin was previously estimated at 55k.

• They recall a previous discussion where activity had collapsed, causing the model's fair value estimate to drop to high 20s or low 30s.

• The speaker acknowledges that some people disagreed with the model's estimate at that time.

Historical Context

• The speaker shares examples from history to highlight the power of mathematics and human achievements.

• They mention an aqueduct in Spain that has stood for 2000 years without mortar or cement, emphasizing the marvel of ancient engineering.

• The speaker reflects on early explorers who relied on math and navigational skills to sail across vast oceans, such as Christopher Columbus and Vasco de Gama.

• They mention Portugal's dominance in the spice trade due to their discovery of a mountain of silver in South America, which ultimately led to their invention of paper bank credit.

Book Recommendation: "The Ascent of Money"

In this section, the speaker recommends a book called "The Ascent of Money" by Niall Ferguson, which explores the history of precious metals, currency, banking debt, and more.

Book Recommendation

• The speaker suggests reading "The Ascent of Money" for those interested in delving into topics like precious metals, currency, banking debt, and equity India Company.

• They mention that the book covers various historical periods up until modern times.

• The author also includes a chapter on Bitcoin and expresses support for it.

Potential Impact of Spot Bitcoin ETF Approval

In this section, the speaker discusses their belief that the approval of a spot Bitcoin ETF will be a game-changer for the cryptocurrency space.

Spot Bitcoin ETF Approval

• The speaker expresses their agreement with the idea that the approval of a spot Bitcoin ETF will have a significant impact.

• They acknowledge the difficulty in predicting the exact amount of flows it will generate but emphasize its potential as a boon for the cryptocurrency space.

FOMC Minutes and Economic Outlook

In this section, the speaker discusses quotes from FOMC minutes and provides insights into economic conditions and monetary policy.

FOMC Minutes Quotes

• The speaker reads a quote from FOMC minutes highlighting headwinds faced by the economy, including tighter credit conditions and higher interest rates.

• They mention that despite these challenges, participants believe it is acceptable to maintain the target range for federal funds rate.

• Some participants express support for raising the target range by 25 basis points at that meeting.

Economic Outlook

• The speaker notes that labor market conditions remain tight and economic activity has been stronger than anticipated.

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New Section

The speaker discusses their thoughts on the Federal Reserve's actions and whether they are surprised by them.

Thoughts on the Federal Reserve's Actions

• The speaker wonders if the Federal Reserve's actions align with their expectations.

• They express surprise at the current state of affairs and question whether the Fed is making the right decisions.

• The speaker ponders why interest rates are being raised and expresses curiosity about the Fed's reasoning.

New Section

The speaker reflects on their observations of busy tourist destinations in Spain and Portugal, noting the diverse range of people visiting from different countries.

Observations in Spain and Portugal

• Both Spain and Portugal are bustling with tourists from various parts of the world.

• The speaker mentions being surprised by encountering many Australians in these locations.

• They also note a significant presence of Germans, attributing it to Germany being similar to Florida for Europeans seeking summer vacations.

New Section

The speaker comments on the strength of the global economy based on their observations of prices and availability of goods.

Strength of Global Economy

• Prices in Spain and Portugal are not cheap, indicating a strong global economy.

• The speaker shares an anecdote about wanting to buy a Lacoste shirt but finding it marked down only slightly, which suggests that there is less merchandise available at discounted prices.

• They mention that they previously anticipated an approaching recession but now believe that we are not close to one.

New Section

The speaker discusses their views on inflation, recession, and potential interest rate hikes by the Federal Reserve.

Views on Inflation and Recession

• The speaker expects inflation to decrease below two percent by year-end due to factors such as commodity prices and the lag effect of owner's equivalent rent.

• They express surprise at the possibility of interest rate hikes, as they believe inflation is not a concern.

• The speaker suggests that raising rates may primarily benefit banks rather than being necessary for economic stability.

New Section

The speaker shares their thoughts on the Federal Reserve's decision-making process and potential reasons behind their actions.

Thoughts on the Federal Reserve's Decision-Making

• The speaker agrees with the idea that labor market tightness could be a factor influencing the Fed's decisions.

• They mention an ADP jobs report indicating a strong blue-collar job market despite concerns about a white-collar recession.

• The speaker speculates that, similar to past decisions, the Fed may be focusing on lagging indicators like the labor market when determining their actions.

New Section

The speaker discusses global bond markets, deficits, and central bank interventions.

Global Bond Markets and Deficits

• The speaker describes global bond markets as unfavorable, with little demand for U.S. bonds.

• They suggest that central banks have become the buyers of last resort due to lack of interest from other investors.

• The speaker mentions running deficits due to political spending but believes that as the economy recovers, there will be less need for such high levels of deficit spending.

New Section

The speaker highlights negative yielding bonds and introduces a special offer related to research on DeFi protocols.

Negative Yielding Bonds and Special Offer

• Negative yielding bonds are no longer prevalent in today's market.

• The speaker briefly interrupts to introduce a special offer from Blockworks Research related to DeFi research and data governance models. A discount code is provided for listeners of "On the Margin" podcast.

New Section

The speaker continues discussing the deficit and money creation, referencing a previous interview guest.

Deficit and Money Creation

• The speaker refers to a recent interview with Lynn Alden, who emphasized that money creation stems from the government's desire to spend.

• They mention that this desire is reflected in the ongoing deficit, which amounts to two trillion dollars per year.

New Section

The speaker concludes their thoughts on money creation and the deficit.

Concluding Thoughts on Money Creation and Deficit

• The speaker suggests that the government's spending drives money creation, leading to deficits.

• They express agreement with Lynn Alden's perspective on this matter.

New Section

The speaker briefly mentions an upcoming episode featuring an interview guest.

Upcoming Episode Announcement

• The speaker mentions having Lynn Alden as a guest in an upcoming episode of "On the Margin."

New Section

The speaker reflects on central banks' decision-making process and potential factors influencing their actions.

Central Banks' Decision-Making Process

• The speaker speculates that central banks consider both sides of their actions, such as labor market conditions and global bond market dynamics.

• They suggest that these factors may influence decisions regarding interest rates and bond buying programs.

The Relationship Between Fiscal and Monetary Policy

In this section, the speaker emphasizes the importance of viewing fiscal and monetary policy together. They explain that these two policies are interconnected and cannot be analyzed in isolation.

Understanding the Interconnection

• Fiscal and monetary policy should be viewed together.

• Many people tend to focus only on one aspect, such as the central bank or the Federal Reserve (FED), without considering the other.

• The speaker highlights that both policies need to be taken into account for a comprehensive analysis.

Observations on Construction and Tourism in Portugal

This section discusses the speaker's observations regarding construction and tourism in Portugal, particularly in a place called Qashqai's.

Construction Boom in Portugal

• The speaker notices a significant amount of construction activity in Portugal, with many cranes visible.

• They mention visiting Qashqai's, a popular tourist destination known as the Portuguese Riviera.

• Celebrities like Madonna, Christian Louboutin, and Ronaldo have been associated with this area.

• Ronaldo is currently building a large house in a neighborhood near the Atlantic Ocean.

Football Culture and Infrastructure Development

The speaker reflects on their experience of witnessing football culture in Portugal and highlights infrastructure development.

Football Culture

• Football holds immense significance in Portuguese society, akin to religion.

• The speaker compares it to their own experience playing soccer in the United States but notes that it doesn't compare to the fervor seen in Portugal.

• Ronaldo is highly revered by fans and considered a "God" figure.

Infrastructure Development

• The speaker observes extensive construction projects not only related to housing but also infrastructure development.

• They draw parallels between this observation and similar trends worldwide, indicating a global push for fiscal spending.

• The speaker mentions the excellent quality of infrastructure in Portugal.

Yield Curve and Economic Outlook

This section focuses on the yield curve and its implications for the economic outlook.

Yield Curve Analysis

• The speaker discusses the terminal rate, which is climbing aggressively towards 5.5%.

• They mention that both the ten-year and two-year rates are increasing, but the ten-year rate is not showing significant movement.

• The inverted yield curve and policymakers' statements about an overheated economy suggest caution rather than optimism.

Historical Data Relevance and Interest Rates

Here, the speaker addresses the relevance of historical data and interest rates in shaping market perspectives.

Historical Data Relevance

• The speaker argues against using certain periods of historical data when analyzing equities or other financial indicators.

• They highlight that specific timeframes may be "polluted" due to artificial factors like zero interest rates during 2009 to 2017.

Interest Rates Perspective

• The speaker emphasizes that normal interest rates should align with capitalism's functioning.

• They assert that zero or excessively low interest rates are abnormal, while higher rates around 5% are considered normal.

Market Anticipation and Demographics

In this section, the speaker discusses market anticipation and demographic factors influencing long-term interest rates.

Market Anticipation

• The speaker notes that some investors anticipate an economic downturn despite conflicting signals.

• They mention Rob's perspective on long-term rates staying lower than expected due to demographics.

Demographic Influence

• Aging populations contribute to lower long-term interest rates as older individuals tend to invest more in bonds than stocks.

• The demand for bonds affects labor numbers, as people are considered out of the workforce when they reach 65 years old.

Neutral Perspective and Capitalism

This section explores the speaker's perspective on neutrality and capitalism in relation to interest rates.

Neutrality and Capitalism

• The speaker suggests that a neutral perspective considers interest rates around 5% as normal for capitalism.

• They argue against considering zero or excessively low rates as appropriate for economic stability.

These notes provide a comprehensive summary of the transcript, highlighting key points related to fiscal and monetary policy, construction and tourism in Portugal, football culture, infrastructure development, yield curve analysis, historical data relevance, interest rates perspective, market anticipation, demographic influence, and neutrality in relation to capitalism.

Rates and Bond Buyers

The discussion revolves around the buyers of bonds, with a focus on whether it is primarily central banks or individual investors. The potential impact of quantitative tightening (QT) by the Federal Reserve (Fed) and the European Central Bank (ECB) on bond markets is also mentioned.

Marginal Buyers of Bonds

• Individual investors, particularly older individuals, are considered to be the marginal buyers of bonds.

• There is a question about whether central banks or mom-and-pop investors are currently the primary buyers of bonds.

• It is noted that central banks like the Fed and ECB may end up buying a significant amount of bonds from the market.

Quantitative Tightening (QT)

• The speaker mentions that according to Yardeni data, QT seems to be happening as indicated by various lines rolling over.

• The Fed and ECB are seen as net sellers of bonds, while it is uncertain about the Bank of Japan.

• Despite rising interest rates, there have been continued inflows into bond mutual funds.

Coinbase and Crypto Market

This section focuses on Coinbase, its recent challenges with regulatory authorities, and its performance in the crypto market. The comparison between Coinbase and its competitor Binance is also discussed.

Regulatory Challenges for Coinbase

• Coinbase has faced regulatory scrutiny from the SEC, which issued a Wells notice against it for operating as an unregistered broker-dealer.

• Additionally, Coinbase's staking program was deemed to constitute a security by the SEC.

• Despite these challenges, Coinbase's stock has shown significant growth in recent weeks.

Comparison with Binance

• Binance, one of Coinbase's main competitors in terms of trading volume, also faced enforcement actions from regulatory authorities.

• Key executives at Binance recently departed following these enforcement actions.

• Kraken is mentioned as another crypto exchange that has been performing well and settled with the SEC.

BlackRock's Choice and Coinbase's Quality

The discussion shifts to BlackRock's decision to choose Coinbase and the indicator of quality provided by Coinbase's custody business. The relative position of Coinbase in the market is also highlighted.

BlackRock's Choice

• BlackRock chose Coinbase over other options, possibly due to its ownership of a high-quality custody business acquired from Zappo.

• Coinbase's custody business is compared to Fort Knox in terms of security for cryptocurrencies.

Indicator of Quality

• Despite regulatory challenges, if Coinbase emerges from this period with better market share, it could be seen as a positive outcome for the company.

• Kraken is mentioned again as an example of another exchange that has been performing well and navigating regulatory challenges effectively.

Zappos and the Genius Behind It

The discussion revolves around the success of Zappos and the brilliance of its founder.

The Brilliance of Zappos Founder

• The speaker acknowledges that Brian and his team presented a strong case for Zappos.

• The founder of Zappos, an Argentinian, is praised for his intelligence and passion.

• His motivation to create Zappos stemmed from witnessing his family lose money due to government devaluation.

• Meeting the founder in person was an exciting experience for the speaker.

Timeline for Spot ETF Approval

This section discusses the timeline for potential approval of a spot ETF.

Deadlines and Possibilities

• The SEC has an initial extension deadline on August 12th, which means a spot ETF could be approved by mid-August.

• However, it is unlikely as the SEC tends to extend these deadlines multiple times.

• The final deadline for approval is at the end of February 2024, just before the Bitcoin halving event.

Maintaining Bullish Sentiment in Crypto Market

This section emphasizes the importance of staying optimistic during bearish periods in the crypto market.

Training Bullish Muscle Memory

• During bull markets, excitement can lead to unrealistic expectations, while bear markets can dampen enthusiasm.

• Instead of succumbing to pessimism, it is crucial to train oneself to remain bullish during challenging times.

• This is the time to make bold predictions and be excited about the future, even when there are no immediate catalysts.

Going Against the Crowd

The importance of going against popular opinion in order to make accurate predictions is discussed.

Pressing the Pedal When Others Disagree

• When everyone agrees with a certain viewpoint, it may indicate that it is already priced into the market.

• This is the time to be excited and optimistic, as significant events are aligning in history.

• Historical examples like Ferdinand and Isabella's venture capital investment highlight how pivotal moments can shape the future.

Exchange of Resources and Discoveries

The exchange of resources between different regions throughout history is explored.

Interconnectedness of Cultures

• Christopher Columbus' voyage brought horses from Europe to America, while potatoes and tomatoes were introduced to Europe from South America.

• Seville, Spain served as a hub for trade between the Old World (Europe) and the newly discovered Americas.

• Native American cultures did not have horses until they were brought by Spaniards and Portuguese explorers.

The transcript provided does not contain enough content for additional sections.

New Section

In this section, the speaker discusses the transition from traditional financial services to the new world of financial services.

Transition in Financial Services

• The speaker mentions that the transition from old world financial services to new world financial services is similar to the shift from 14.92 (referring to Christopher Columbus' discovery of America) to a new era.

• Financial services is an industry with constant technological turnover and relatively short average lifespan for companies.

• European banks are an exception, as they have been able to maintain their presence for multiple centuries, which is not typical in other industries.

• It would be interesting to see if disruption occurs in these long-standing European banks.

New Section

In this section, the speaker concludes the conversation and expresses gratitude for being allowed to deviate from the usual format.

Conclusion and Gratitude

• The speaker thanks Mark and considers it the best hour of his week.

• He expresses missing Mark during his absence in recent weeks.

• The speaker appreciates being given the opportunity to go "rogue" during the conversation.

• He looks forward to returning and continuing discussions in Chapel.