ROLLUP: Bitcoin ETF Approved | ETH Moves | EigenLayer Cosmos

We have today a Bitcoin spot ETF that has just been approved. I now I am absolutely excited about this.

Bankless Nation, happy second week of January. It's time for the weekly roll up. I've got Anthony Sesano here with me. He is here in lieu of David, who is off in the mountains. What are your thoughts on the Bitcoin ETF just going into this episode?

Yeah, I mean, I think I'm just relieved that we can stop speculating on this now. I know that people have already begun speculating on the ETHSpot ETFs, but it's a different thing where, you know, for months and months now, since BlackRock really filed for the ETF in June of 2023, it's been nonstop speculation. Or will they approve it? Will they not approve it? You know, Gensler hates crypto, the SEC is unfriendly towards crypto. Um, and then as we got closer to the date, the picture became clearer and clearer, but people were still doubting it up until the day of approval. They were saying, you know, Gensler's gonna rug us, that's what he loves to do. Uh, and then in the end, what ended up happening was that those court cases that the SEC lost, especially the one against Grayscale, ended up forcing the SEC's hand in or in in order to approve these. And Gensler was one of the ones that voted for the approval. There were three for and two against, I believe. Yes, which is which is quite funny to see.

It's beautiful and definitely worth celebrating. So, guys, a few things we're going to talk about. Number one, the spot Bitcoin ETF. How did it happen? It seems like the SEC approved this begrudgingly. They came in kicking and screaming, but we still have it approved. And uh, as Anthony said, Gary Gensler was the deciding vote. So we'll talk about some of that. Also, why is ETH price rocketing up? Anthony, I want to get your take on that because I thought this was Bitcoin's week. Yeah, we have an amazing ETH price uh on the charts. And also, we're gonna talk about what if ETH Ethereum was used to secure all the Cosmos change. There's some interesting developments in Eigenlayer that might make that possible. Gonna pick your brain on that. Circle IPO, that was just breaking at the time of recording. So all of this and more on the weekly roll up today. But Anthony, we got to start with uh the markets, I think, today. These market charts brought to you by our friends and sponsors over at Kraken. Let's start with Bitcoin on the week. So we are up, I believe, almost 9% on the week, which you would kind of expect this given the Bitcoin ETF uh approval. So at the time of recording, Bitcoin currently sits at about 47K, uh, so 47,359 to be exact. We've got some interesting candles uh like in the charts there this week. I think this one on uh January 3rd, um, like, and then some of this over here. Um, overall, do you have any thoughts on on Bitcoin price? Is this kind of expected up 9% on the week?

Yeah, I mean, I think it's just the logical conclusion of kind of the speculation leading into it, right? Where essentially the bulk of the move on the ETF stuff happened from 25K to 45K. That was the ETF-related move because when BlackRock filed for the spot ETF, uh, it was June, as I said, 2023. And the BTC price, I believe, was around 25K. It went to 30K on that news, but then came back down. But if you look at like since then, it was between 25 and 45k is the bulk of the move. And that was the market pricing it in. And I know that's a bit of a meme where people say the market doesn't price anything in. It's like, well, it does when it's that obvious. Like everyone kind of knew uh that the ETFs were filed. They knew when the deadlines were for them to get approved. And they also uh were just speculating on that chance of approval. And then you had people like um Eric Balkanis and James uh Syfard, who I follow on Twitter, two ETF analysts from Bloomberg saying, Oh, there's 90% odds of it getting approved. And then you basically had the price keep going up, the more and more confident the the market got that these things were getting approved.

We had grayscale in September, which seemed to inject some confidence too. The co the court case wins.

Yeah, yeah, exactly. Exactly. And that's why I why I said like that whole move between 25 and 45k was basically the market being convinced that these things were getting approved. And that's why you saw BTC basically not run totally on its own. There were other things outperforming here and there, but it had a monstrous run. Like that's a very big run for BTC, given that BTC's market cap is so high compared to everything else. And then obviously when the day came, no one knew what to do. Like, is it a sell the news event? Is it a buy the news event? And that's why we've kind of been flat on BTC. But I think the more interesting story, as you alluded to, was what happened with ETH on the day.

Let's flip there. What the heck? So uh ETH price up about 20% on the week, I believe, on the on the seven day. So right now at the time of recording, uh 2650 is the price of ETH. Kind of stealing maybe the thunder from Bitcoin. But I guess your story is um big the Bitcoin ETF, a spot ETF was kind of priced in long before this, starting all the way in June. But like, explain what's happening with ETH. Is this now ETH starting to price in a spot Ethereum ETF, or do you think this is completely unrelated to ETFs?

No, I mean it's definitely related to the ETF. And I like to call this move uh rotate the news. Where essentially, um, even before the ETFs were officially approved, the day before we saw that the um SEC's uh Twitter account was compromised and someone sent out a fake approval tweet and BTC dumped and ETH pumped on that. So the market basically showed its hand and said, hey, you know, when the ETFs are approved, we're all just gonna rotate to ETH because we're now speculating on the ETH ETFs, which is obviously the next major narrative. And that's why you've seen ETH go up so violently. After lagging, mind you, like ETH BTC has been on a downtrend since June 2023, like a complete downtrend. And now you're seeing like the rotate the news, as I called it, uh playing out here, uh, which I think is is quite funny, but not unexpected for me. I I I have actually been calling for this for months on my own show, where I basically said that you're gonna see the narrative shift immediately because when the ETFs get approved, there's no longer a narrative to peddle. There's no, oh, you know, we we're waiting for the ETFs to be approved. Well, there isn't for BTC, but there is for ETH now. So the narrative shifts there.

So it's almost as if the Bitcoin trade is over and the ETH trade is is kind of just begun here. This is uh the ratio that you were talking about. I don't think I've seen such a green candle on the ratio in a very long time. And it it does seem counterintuitive that that would happen like the week the spot Bitcoin ETF is approved. But um look at the spike back up, and we're back up to uh 0.056 at this point in time. Uh so do you do do you do you predict kind of a recovery on the ratio for ETH uh for 2024?

Yeah, I mean, I think ETH is going to perform quite well. I think when you look at the ETH BTC ratio, it's very it's definitely too early to tell. Um, you know, the these violent moves tend to happen, as I said, because there's a those narratives going on. There's like this hot ball of money that rotates between assets, things like that. But but, you know, if we look at history, ETH has always outperformed BTC in a proper bull market, proper uh new money bull market. Like I think over the last six months, it's really been existing money just rotating around, uh, especially flowing from BTC as it goes up, you know, that you have that wealth effect, and people speculating in BTC are like, well, what else can I buy? You know, and we've seen some other assets outperform. Uh, and I think that now going into the proper bull market, which I think has basically started uh at the beginning of this year, we're gonna see all that fresh money coming in now. Now, of course, a lot of it's gonna go into BTC via the ETF, but that doesn't really stop fresh money going into centralized exchanges like it usually has in other bull markets. So I think when it comes to ETH, ETH's gonna be a beneficiary of that for sure. It's gonna be a beneficiary of the of the ETF narrative. Um, but also what ETH has that BTC didn't is now people get to see how much money these ETFs actually take in. So if the BTC ETF takes in billions and billions of dollars, what do you think people are gonna speculate on? They're gonna say, well, if BTC can do that with the ETF, why can't ETH do that? And they're gonna try and front run that and basically be like, I'm not gonna wait for billions of dollars to come into ETH, I'm gonna buy now. And then you've got obviously the normal bull market happening uh right now within crypto, which will bring in more fresh money. So yeah, I think ETH is gonna have a fantastic 2024.

At 2600, we are back to prices from

uh let's see if I can zoom out some more here.

I think it's May twenty twenty two, just before the terror collapse. Yeah.

So almost two years ago now.

Big big recovery. And it wasn't just ETH, but it's the entire ETH ecosystem. This is uh Ignis saying, seems like the SEC approved ETH ecosystem ETF by mistake, laugh out loud. And then he uh shows Arbitrum up 28% on the week, Optimism up 24%, Rocket Pool up, synthetics up, Lido, Mantle, Maker, all of these ETH ecosystem tokens. Is this kind of what happens, you think, in an uh Ethereum bull market? So when ETH price soars, then all of the other, I guess, um, you know, like higher uh beta uh assets in the Ethereum ecosystem rocket up as well. Are they kind of correlated in this way?

Definitely. I think when you kind of look at the ecosystems, not just Ethereum, but other ecosystems, they all tend to move together. Like people call them beta, like when you speculate on tokens other than like the main ecosystem token, which in this case obviously is ETH. And I think when it comes to some assets as well, like Arbitrum and Optimism, they're actually in all-time high price discovery right now because they came out during the bear market, essentially. Like they're the tokens uh got minted and created during the bear market. So they're they've actually not had a bull market yet where they've gone into price discovery. So that's what's happening there. And then you've also got a bunch of other complementary narratives like EIP 4844 coming in the Denkun upgrade in, I think, March is my estimate for when it goes live on mainnet. That also helps things like L2 tokens because people are speculating on that. So if you really take that all together, uh, yeah, an ecosystem pump makes sense. And then it happens across other ecosystems as well.

Um looking at kind of seven day big token moves, look at ENS, uh Anthony, up 70% on the week. This this is interesting too. Ethereum Classic? So what is going on here? Ethereum Classic up 54% on the week. Is this um just you know some traders having fun? Or do you think this is an example of is this retail flooding in and just mistake doing the classic? Um I thought Ethereum Classic was Ethereum. Is this maybe a sign that retail has entered the fray?

No, no, it's definitely just traders having some fun here, just speculating on these things. And they're really just very short-term moves. They may look violent, like you know, 50% up, and you may think, oh, wow, that's a huge move. But I went back and looked at like the ETH ETC chart, and ETC is down like 99. something percent against ETH. Um, so when you look at these violent moves, you have to kind of go further than seven days out because you have to look contextualize it. Because a lot of these assets are beaten down a lot, and then they they might spike up a lot, but then they're really uh not really going up a lot because they've just gone down a lot, right? So they need to go up a lot more to recover how much they've gone down. And I think a lot of people miss that. They're like, oh my god, I missed this 100% move on this random coin. It's like, yeah, but if you held this coin at any period in the last 12 months, you probably didn't do very well at all, and you probably lost money. So you can't just look at I think the seven days, you have to definitely zoom out uh on these things.

Well, Ethereum ecosystem having a just a banger start to the year. Um Arbitrum uh up over all time highs, optimism as well. Um L2beat, total value locked at 23 billion. This is another all time high. I'm just curious, I'm looking at L2beat.com. Um, what in your opinion, Anthony, are kind of like the the key metrics? Do you still look at total value locked? Do you like um you know the uh transactions per second and scaling factor types of metrics? What are the most valuable metrics for you when you're looking at uh layer twos?

Yeah, it's kind of hard because I'm of a pretty strong opinion that a lot of the metrics that we have across the board, whether it's a layer one or layer two, it doesn't really matter. They're kind of inferior for a number of different reasons, right? Like that they all have their own kind of asterisks next to them, which basically have a list of caveats. Like when you look at total value locked, you can say, okay, well, it's up, but it's up because the token prices are up, right? It doesn't necessarily mean that there's new value being deposited here. Like, for example, if there is a million ETH deposited and ETH goes up 10%, well, now that existing million ETH is worth 10% more, it doesn't mean that there's 10% more ETH that went in. So TVL is definitely an inferior metric from kind of that perspective. But I like to take like a holistic approach where I look at TVL, I look at, you know, transactions per second, like the scaling factor that you should showed before, transaction counts, active addresses, fees paid is a fan favorite for me, honestly. Uh, because if you see fees being paid, it means that there's actually real human users, well, not just humans, but obviously bots as well, that are willing to pay to use that service. Uh, because a lot of this stuff can be gamed as well, whether that people are trying to farm airdrops, things like that. So I try to take a holistic kind of look at things. And also I don't look at like the last seven days or 14 days. I look at like six to 12 months minimum for activity across the different L2s, because then you get a clearer picture of uh sustainable activity rather than hot activity, like we saw with inscriptions the other week. The inscriptions craze on the EVM chains. That was very like one week and it was done. And then you see all the metrics spike up a lot. But if you didn't know that that was inscriptions, you would be like, oh my God, this is so bullish. Like everyone's flooding into this right now. When in reality, it was just like a uh the inscriptions kind of trend going on for about a week and then dying off, of course.

Actually, uh later in this episode, there's a Delphi report that came out about kind of layer twos. I want to pick your brain uh about some of the their conclusions in the summary and see how it compares uh with your own. But all of those metrics that that you mentioned over the last six to twelve months, what would you say about layer twos? I mean, are we in a healthy uh place? Uh is it really indeed, as it looks like on many of the metrics? Are we at kind of all time highs in terms of layer two traction? What uh what do you see?

I mean, definitely, yeah. I mean, the layer twos have never been stronger than they are today. And there are some breakout winners. Obviously, Arbitrum 1 is the leader right now, I think, across every metric. You know, TVL, DeFi, uh trading volume, they're they're killing it, honestly. They've they they the other day they did more than Ethereum Mainnets, which is the whole point of these layer twos, by the way. They they should be doing more volume, more kind of like um active users, more transactions than Ethereum Mainnet, Ethereum L1. Uh, but yeah, no matter what metric you look at on L2beat or growthhe.xyz is another website I like to use, it's all up only. It's all pretty much at all-time highs in terms of activity. And we're really just getting started too, because these L2s have not existed in a bull market with new retail flows coming in where they can basically onboard from Coinbase or wherever else. And now they do. And they're very easy to use because you can use the same wallets that you use for Ethereum mainnet, uh, and then you can just onboard directly and you get cheaper fees, faster transactions, and there's a lot of liquidity there too. Like Arbitrum 1, there is so much liquidity on there now. Like there uh there's probably gonna be more than than than mainnet for a lot of tokens on on there uh uh uh very soon.

It's very interesting as well how um some of the the exchanges can prioritize their own layer twos. So I was on on Coinbase um the other day and just looking to kind of withdraw from uh some USDC from a Coinbase account that I have. And the leading option, it sort of says you can you can withdraw to Ethereum or you can withdraw to all of these layer twos, but the leading option was withdraw to base and it's like free, fastest. It's like advertised within the Coinbase app, and they're clearly promoting their base layer two, as you'd expect them to do it because they have uh like ownership of the product, but it just shows you a glimpse of kind of the the exchange layer two uh approach and um you know how they're going to serve as what Coinbase has 130 million users, something like that, 100 million to 130 million users, and you can only expect that to grow. Um, I was looking at some of their their you know leaderboard app type, um, you know, how many days they've been the top app in the app store. And during the the bull market, they hit number one like often. It was like six days last time. And so um you can expect that to be a massive, probably market underrated onboarding mechanism for uh normies, quote unquote, into layer twos.

Yeah, definitely. And Coinbase is actually doing a lot of interesting things with Base. Uh, one of the most interesting is their Coinbase verification program, where essentially, if you're comfortable doing this, you can verify and tie your Ethereum address to your Coinbase account using what's called the Ethereum attestation service. And then you get free transactions. I don't think that's enabled yet, but it will be enabled soon. You'll get free transactions and other perks on base. So this is a really neat way for Coinbase to verify that you're not some bot trying to farm something. You're actual real verified human. Uh, and then it and then only Coinbase knows that. This attestation does not reveal anything about you to the public. It's just Coinbase knows that the Ethereum address that you have tied to your Coinbase account is you. And then yeah, they give you perks on base. So base is gonna be huge. People are still underestimating how big base is gonna be simply because Coinbase has such a massive user base and they're gonna do so everything they can to get fees as low as possible, uh, not just for like the verified users, but for anyone really, uh bring as much liquidity as possible. And not just with with DeFi, they're doing a lot of stuff around NFTs, social. Uh it yeah, it's gonna be big, I think. Um, and and not just because they have the user base, but because they're committed to actually building it out and actually building it out over the long term alongside the entire optimism stack, which is what's powering the base network.

Well, we got a lot of green on in the markets this week. Total crypto market cap just floating below 2 trillion. So we're at $1.9 trillion. The $2 trillion mark will be another celebration. And Bitcoin also flirting with a trillion as well. So $928 billion right now. So uh good things ahead. Uh, I want to talk to you a bit more about the Bitcoin spot ETF and break that story down, how it happened. There was some drama at the last minute, and Gary Gensler with the deciding vote. So who dissented and who thought this was a good idea? Also, I want to talk to you about what we can expect from layer twos in 2024. Um, specifically data availability layers, um, eigenlayer as well. We've got some more stuff to cover. We'll be right back. But first, we want to tell you about some of the sponsors that made this episode possible. As we said, the spot Bitcoin ETF has been approved, giving you a little bit more detail on how this happened, some of the drama that unfolded and what this means next. But here's a tweet breaking the SEC officially approves all spot Bitcoin ETFs. Remember, there were a number of uh institutions, companies vying to apply for spot Bitcoin ETF. They were all blanket approved. So we got Van Eck, we've got Bitwise, we've got Fidelity, we've got Franklin, we've got Valkyrie, we've got, of course, BlackRock and Grayscale and Wisdom Tree, all of these established institutions. I think the high level of why this matters, we've covered before on bank lists, as Anthony pointed out, there have been kind of months leading up to this outcome. Ever since June, we've been talking about the spot Bitcoin ETF. And the big win for crypto, I think, is this new pipeline to capital. So analysts have estimated between 10 and 100 billion dollars in new buying pressure that this could unlock over the first 12 to 24 months. That, of course, is big. Uh, it also maybe it means a bull market confirmation, at least in the sphere of normies, right? This is going to make absolutely massive news. It's it's uh much heralded, never happened before. And I think maybe one underlooked thing is.

They actually didn't want this. The regulators, let me say, and the SEC actually didn't want this to happen. In particular, Gary Gensler and Elizabeth Warren in her anti-crypto army. They didn't want this to happen. So that's the chair of the SEC very clearly was resisting this and dragged into this, kicking and streaming and screaming. And yet he was put in a position where I think he felt like he had to approve, probably like as part of the court order, as part of the mounting pressure to like just do his job and stop standing in the way of this type of thing. And I think that is overall bullish on the story of crypto in the United States and across all other jurisdictions, even though the governors and the regulators may not want this technology, may want not want to support this asset class, they're kind of being pushed into it by their population. In this most recent case, by their elite bankers, by the Larry Finks of the world, by the black rocks of the world. That's how this hits me and the significance of it, Anthony. How does it hit you?

Yeah, same here. Exact exact same view here, especially on the fact that they were forced into this. Um, and as I mentioned earlier, I believe it was because of the lawsuit that the SEC lost to Grayscale over converting GBTC, uh the trust into a proper spot ETF. And what I find kind of funny about them being against these things is that they uh they being the SEC, they have allowed other products to exist that are much worse for investors. I'm not saying the ETF is bad for investors, but they've allowed products to exist for a long time that are really bad for investors. And uh to keep on topic here, but two of those products are GBTC and ETH, those grayscale products. And the two reasons why those products are horrible is one, they have a really high management fee for starters. I think it was as high as 2%. Uh, and two, they're a closed-ended fund. So you couldn't actually redeem your GBTC for actual BTC, which means that the thing never traded at really at fair value. It always traded around fair value. And then at one point, it got to a discount of about 50%. So if you had bought at around fair value, even at a premium, uh, you were down 50%. And if you had sold that, you were just wrecked on it. So the SEC allowed this product to exist for a long time, mind you. It's not a new product, it's been around for a long time. Accrue, what, $20 billion worth of AUM? Uh, and then deny all the spot ETS because they considered it too risky. The hypocrisy is insane to me around this. And it really just boils down to politics, I think, at the end of the day, especially from Gary Gensler, who obviously wants to get promoted within his um his kind of like a political sphere to probably Treasury, and Elizabeth Warren is basically his boss, so he's just following what she's telling him to do. But because of the fact that the SEC has, I mean, they didn't just lose against Grayscale, they've lost two other cases as well. They lost against Ripple as, as we um, as we know. Um, but because they're lost so many times, they just became such an illegitimate institution in so many people's eyes. Then they had all the pressure from BlackRock et L to get this thing approved. So that's what you've seen happen. Basically, they're they've been kicked and dragged, kicking and screaming to approve these things, their hands are tied, and they had to approve it.

Yeah, incredible point about these uh terrible products already existing and the the Bitcoin spot ETF only being an appro an improvement for retail investors. There's some drama leading into this, Anthony. So on uh Tuesday, I believe it was around like four PM Eastern time, something like this, uh this tweet

Came out of the SEC official Twitter account. So this is at SEC.gov. And this happened on Tuesday saying today the SEC grants approval for Bitcoin ETFs for listing on all registered national securities exchanges, basically announcing that the Bitcoin spot ETF had been approved. Again, this was on Tuesday afternoon East Coast time. They even include a uh a quote from Gary Gensler himself. It turned out, at least the SEC said, that this tweet was a compromised uh tweet sent by a hacker, Anthony. And so what happened was the market price on Bitcoin just like absolutely torpedoed up and then fell back down. Um, some were calling this kind of like market manipulation. I believe within a half an hour or so, Gary Gensler tweeted something and said, basically, the SEC Twitter account has been compromised. Uh, you know, there has been no Bitcoin spot approval. Again, this was on Tuesday, so before we had the official word. Um, it seems like you know, people were speculating all sorts of things, whether this was an intern who posted the tweet 24 hours earlier, or whether a hacker had indeed gotten into the SEC Twitter account and uh tweeted this out. It looks to me, uh, you know, in the weight of the evidence, like it was probably just a sim swap type of attack. They didn't have 2FA on the account and some sort of third party compromised the account and tweeted this out. But like, what chaos. I mean, like, I can't believe the incompetence of uh the SEC causing like billions of dollars of accidental market manipulation by not doing the basics of um having their Twitter account secured. What's your take on all of these, like this craziness?

Yeah, I mean, I think it's just perfect when you contextualize it. You contextualize the fact that the SEC keeps saying that they want to protect investors, right? That's their mandate as given to them by uh by the US government. Uh, but they can't even protect their own Twitter account, which is like the bare minimum, I think, of uh of protecting yourself, right? Protecting a Twitter account is not hard to do. Like all you have to do is set up proper 2FA. Like, I know that there's been a lot of uh drama around doing mobile 2FA, but if you are the SEC, you should have at least one person in your organization that can say, hey, we need to secure our accounts, right? We need to secure our Twitter account and others. So, but they didn't, apparently. Apparently, it was very easy to compromise the SEC account.

Yeah, this is uh some senators weighing in. Fraudulent announcements like the one that was made on the SEC's social media can manipulate markets. Uh we need transparency on what happened. That is uh Senator Cynthia Lemmis. Um, this is Philip Martin. Hey Gary Gensler and the SEC. Serious offer as a crypto exchange. We've had lots of experience. Philip Martin is by the way from Coinbase with security protocols around social media. And as a veteran patriot, I loved help my country. If you want some help, feel free to reach out. So this is Coinbase offering their help to the SEC in uh in an ultimate irony here. So kind of crazy, I think, that that all of this happened like just 24 hours before it was officially approved. Um, certainly a maybe a punch to the gut for the legitimacy of the SEC. But you know what's interesting to me, Anthony, is this actually barely passed. So for people who don't know, it has to be passed by um the majority vote of a commission, right? So Gary Gensler, uh, he is the chair of the commission, but there are five commissioners, five folks that vote, including Gary Gensler himself. And the Bitcoin spot ETF barely passed with a three to two vote. So the three who approved were Hester Peirce, uh, you know, gentleman by the name of Mark Uyeda, I believe that's how it's pronounced, and then uh Gary Gensler. And then there were two against, including Caroline Crenshaw and uh another commissioner as well. Um, did you get a chance to read some of the statements coming out of both Gary and Caroline and Hester Peirce, uh, Anthony?

Yeah, I mean I saw the highlights of both Gary's and Hester's uh statements. Um I think in Gary's statement he mentioned that uh he, you know, the SEC is supposed to judge things based on on merit, but and then he goes on a bit of a tangent and says that like just because we approve these ETFs doesn't mean that we endorse them or think that they're good investments, which, you know, is a really stupid thing for a regulator to say if they're trying to be neutral, because that's not neutral. Like, is he gonna say this about everything that they approve now, every ETF that they approve? It really does seem like, as I said, they were kicked and screamed uh dragged kicking and screaming into this, and they needed to have their last kind of say on the fact that they think this is a really bad idea, which, in my opinion, the SEC can go screw themselves on that because it shouldn't be up to them to tell me what is a good or bad idea to invest in. Like I know what, you know, I know what I'm doing. I think people are smart enough to figure it out for themselves, and it should be on the on the person to make their own decisions.

So Gary voted yes, uh, we should say. But yes, this statement, I read it the same way you did, Anthony. It's kind of a whiny statement. He basically says um he says this. I have often said that the commission acts within the law and how the courts interpret the law. And then he goes on to say that um basically the their loss in the uh grayscale case in September kind of forced their hand. And so now this is the court system interpreting the law for the SEC and uh Gary just you know acquiescing to uh to their will here. But you're right, he he says this at the end, just uh you know, a parting stab. Though we're merit neutral, I'll note that the underlying assets in the metals ETPs have consumer and industrial uses, right? So, like silver, gold, um, platinum, uh palladium, all of these have industrial uses. Well, in contrast, Bitcoin is primarily a speculative, volatile asset that's also used for illicit activity, including ransomware, money laundering, sanction invading, and terrorist financing. So he absolutely had to say that.

That that just reads like an email Elizabeth Warren sent from it. Hey, you need to include this statement, uh this this kind of part in your statement, uh uh uh, you know, uh, because this is what I need to kind of push as my messaging out there, uh, which she's been she's been doing, right? She's been like the leader of pushing this messaging of crypto being just used for terrorism financing, even if it's made uh it's it's based on completely made up facts, right? That she's kind of pushed in Congress.

It's definitely anti-crypto army talking points. What was more concerning to me was uh Caroline Crenshaw's statement, who's another SEC commissioner. And in a worrisome fashion, like one of these commissioners might be in line for the throne of chair at some point in time. Gary Gensler's not going to be doing this forever. And in fact, his days might be numbered. And so, right, there's like crypto's choice, which would be Hester Peirce as uh SEC chair, but then there's others who could be contenders, including some of these other commissioners, maybe like Caroline uh Crenshaw. And um, she says this she dissents and she voted no. And she said, the commission also has not taken into account adequately broader public interest considerations. For example, it is well documented that many criminals use Bitcoin to evade U.S. financial sanctions, ransomware attacks demand Bitcoin payment. Analysis shows that these payments may end up funding our geopolitical rivals and av and adversaries in approving these products for listing and trading on American exchanges. Could we inadvertently be working at cross purposes with the goals of other arms of our government? Wow, I didn't realize all of that was in your mandate at the SEC. But apparently, according to Caroline Crenshaw, it is, she says, I am deeply concerned about today's action. She also goes on to take a jab at Bitcoin. She says, basically, I have a simple question. Wasn't Bitcoin supposed to solve this? If this technology is so revolutionary, why do they need an ETF in the first place? So definitely a lot of anti-crypto vitriol and a lot of opinions being baked into what's supposed to be a merit-based, credibly neutral regulator. Of course, the opposite end of the spectrum was just an absolutely banger piece from a statement from uh Commissioner Hester Peirce, who says, today marks the end of an unnecessarily, unnecessary but consequential saga. What happened in the past is the goalpost kept moving as the commission slapped denied on application after application. And then the commission, rather than admitting error, offered a weak explanation most recently for its change of heart. She's basically saying, we're just doing what we should have done all along.

And the commission, the SEC, has just put up roadblocks for the last 10 years. We squandered a decade of opportunities to do our job, she says. If we had applied the standard we use for other commodity-based ETPs, we could have approved these products years ago. But we refused to do so until a court called our bluff. Yes, well said. That's exactly what happened. And she concludes with this: I'm not celebrating Bitcoin or big Bitcoin-related products. What one regulator thinks about Bitcoin is irrelevant. I'm celebrating the right of American investors to express their thoughts on Bitcoin by buying and selling spot Bitcoin ETPs. So you got the good regulators on one side who are kind of doing their job as a merit-based and incredibly neutral arbiter. And then you have others like Caroline Crenshaw who are just putting in roadblocks and I don't know, forcing kind of their views of the asset class into their regulator position. I don't know how we get out of this state, Anthony, but I guess this is progress kind of winning the Bitcoin spot ETF, even though the SEC was brought into this kicking and screaming.

Yeah, I mean, it's just like weaponization of regulatory bodies, right? This is exactly what's happening with the SEC, and maybe it'll happen with other regulatory bodies in the US. I obviously I'm not across all of them, but I'm pretty across the SEC given that it's relevant to crypto. Um, but it it just feels like, yeah, as I said, like Elizabeth Warren is weaponizing the SEC, maybe not just her, maybe there's others as well, but weaponizing it to achieve her own political goals, right? Because a regulator should not have an opinion on these things, in my in my opinion, right? I don't think that they should have an opinion on the on the actual underlying assets. They should just look at it as a kind of merit neutral thing, as as Gary Gensler said, not make these statements and put out these statements uh and just kind of approve it or deny it based on on the merits, which I don't see any issue with there being a Bitcoin spot ETF. I don't see there being any issue with an ETHSpot ETF. And honestly, a lot of the other assets out there in crypto, I wouldn't see an issue with that either. Because I mean, a lot of people can already access these assets as well, mind you, right? Like they can already buy them on centralized exchanges and and and other kinds of such places. Um, but I think the the main worry for people uh becomes that, oh, well, you know, these ETFs are in retirement accounts. What if people put put their money into these things? Well, people can put their money into anything in their retirement accounts. Like there are a lot of things. Exactly.

There's a lot of traditional investments that are bad investments. So it doesn't matter if it's crypto, if it's a stock, like if it's a bad investment, it's a bad investment. It's simple as that, right? And uh, as we've seen in crypto, people are very quick to put their money into bad investments, uh, uh, regardless of how many warnings you put in place, or regardless of how many times you tell them this is a bad investment. I mean, I have people telling me all the time that these things that I believe are legitimate scams, they tell me, no, it's not a scam. I'm like, okay, well, you go do you. Uh and no amount, no amount of like regulatory protection that these uh regulators think that they're going to be able to put in place would prevent people from doing this. People have to learn on their own. They have to make their own decisions. And I'm just sick of this kind of babying that these regulators, I mean, they say that they're doing this. I think in reality they're just doing it as a political play. It's not you know, they keep trying to.

And also Anthony they've been so freaking wrong. What have they protected uh like investors from over the last ten years?

They didn't protect anyone from T.

Like

Yeah, exactly. They didn't protect anyone from FTX. They didn't protect anyone from Celsius and others. Like there was no protection going on here. And and the fallout from those things have been massive. Whereas the fallout from Bitcoin's price going down has been, hey, wait a few years and you'll be you'll be in Ukraine again.

It's absolutely frustrating. But here's where we are. One of the other things we've just kicked off is a Coin Derby. I think that's what James Seyfert calls it. And look at all of these companies now trying to lower their fees. So Bitwise, Arc, Fidelity, Wisdom Tree, all of these, Van Eck, they're all in a race to uh discount their fees for the six first six months. This just started happening earlier this week, and I think is uh is bullish again for um the ETF. Is we've got some competitors, it's not just BlackRock in here. Although I do still think, Anthony, there will be some power law winners. Um, in addition to kind of power law winners and whoever wins the ETF derby, um, there's also I think the existing exchanges who could be winners here. So um Kraken owns a company called CF Benchmarks. That company is going to be used as a reference rate for many of the Bitcoin ETFs, as well as um Coinbase. Eight of the 11 firms that file the spot Bitcoin ETF are custodying those assets with Coinbase. So I think existing US based exchanges are the big winners here as well. But what one question I think in in my mind, Anthony, and I think in the minds of of many uh listeners, is when

ETH spot ETF. Um

there is a May 23rd final decision deadline for the Van X spot ETH ETF. I'm not actually not sure. I'd have to talk to Eric Balciunas or James Seyford about kind of the delay details there. But there's the possibility, however, maybe it might be remote, there's the possibility that we could have an ETH spot ETF approval in May. Do you see that happening with the current um SEC? It would all depend, it seems like, on Gary's vote, right? Because there'd definitely be two commissioners, yes, two no, which makes Gary the decider here. What do you think the possibilities are of that in May?

Yeah, I mean, I may be a bit biased here given that like I'm an ETH megabull, right? As as everyone probably knows. But I think that the chances are quite high of the uh the ETH spot ETFs getting approved by that final deadline. And the reason I think this is uh, you know, there's there's a various different reasons, but uh a major reason is that they already approved the futures ETF, the futures ETH ETFs a little while ago. Now, the reason why this is a big deal is because they the SEC lost the case to Grayscale based on the fact that they had approved the BTC futures ETFs, but then denied the spot ETFs. And the courts basically said to them, hey, why are you doing this? Like they're basically the same product. You can't deny the spot ETFs and improve the futures ones. You have you basically have to approve them both. So because of that, if they go ahead and deny the spot ETFs now, it opens them up to another lawsuit in which there's already precedents set because of the grayscale win, and they just would probably lose again. So again, it it's a really bad look for the SEC. It's a bad look for Gensler if he's still, I guess, the chair by then. I mean, he probably will be. It's it's uh it's not likely he he kind of leaves this year, but we'll have to see how that plays out. Um, but that is that is kind of the major reason. Um, and I think a second thing that a lot of people probably haven't paid attention to that is very, very important.

A few months ago, I would say maybe coming up on six months ago, the SEC changed their tune towards ETH. They stopped calling ETH a security. Like Gary Genzel stopped making comments about ETH being a security. The SEC stopped making comments about this. And they stopped saying that all crypto assets except BTC are a security. They basically said that most crypto assets are securities. So now they leave themselves open to oh, okay, we can say most are securities, but like there's these ones here that aren't. I noticed that change.

Change in my

It was it was a it was a pretty pretty substantial change in language there, which basically to me means that they're not even going to try and kind of uh go after ETH uh as uh for being a security or whatever they want to want to do there, especially in the in the in the um light of the fact they lost against Ripple in Court. So given those kind of reasons, as well as the fact that we just got the BTC spot ETS be uh approved, given the fact that the BlackRock has also filed for an ETH spot ETF, I think the chances of them being approved by that deadline in May are quite high because the products themselves are just the same as a BTC ETF. It's not a staked ETH ETF. The product itself is the exact same as a BTC ETF. It will probably use the same custodians, it will have the probably similar fees. So all these issuers have to do is copy paste. And all those amendments that they had to do with the SEC, they've already done them for BTC. So now it becomes a very easy kind of okay, we can we can approve the ETH ones. Uh it's basically the same thing as BTC. Uh and yeah, so that's why I give it like a relatively high chance of happening. I think that Eric uh uh Bolchounis, who you mentioned, I think that him and James give it like a 70% chance or something like that by May. I would say that that's where I'm at right now, but I don't know. I uh my the the ETH bull inside me uh thinks it's higher. Uh I think. But I I think based on my comments that I just made and the reasoning I just gave, it seems like a pretty good chance to me.

Well, you know, all the like Larry Finn, all the all these banks are still going to want it just as much now that they've they've um got a Bitcoin ETF. And then Grayscale, as you said, could just run the same play back, right? Take them to core for the Grayscale ETF. Uh, and so I'm I'm sure the SEC has to think that that's coming. Uh, one interesting thing about all of this is financial advisors. I think you can expect to now begin shilling uh Bitcoin and crypto in general. This is a um a survey done last year by uh Bitwise. 88% were interested in purchasing these are financial advisors. This is basically where uh US boomers and um Gen X keeps kind of their wealth, right? 88% would purchase the Bitcoin ETF, but they're waiting for the spot Bitcoin ETF. They've just been waiting for a product to sell. 88% received client questions about crypto of last year. But here's uh one of the things that I find interesting is only 40% believe that the spot ETF would be approved in 2024. This survey was done last quarter. It shows you just financial advisors are just not tuned into crypto. But once they have a product to sell, they'll be like, yep, go buy Bitcoin, and hopefully later, go buy Ether. The last thing I'll say, of course, and we've got to say this because of course you know, we are bankless. The best Bitcoin ETF is the one you never have to buy, um, bankless listener, because whenever possible, you should own actual Bitcoin. Own actual crypto, own your private keys, not IOUs. Uh, this is for the normies who can't do that. This is for the retirement accounts. Uh, and so um, you know, I'll end with that. Anthony, we got a lot more to cover, including layer twos. Also, I want to get your take on Justin Drake's answer to the question how do we fix layer two fragmentation? I think he had a fantastic response. Going to talk a bit about using Ethereum to secure Cosmos chains. And also, did Elon Musk just rug NFTs on Twitter? We'll talk about all of this and more. But before we do, we want to thank the sponsors that made this episode possible. A little bit of news that was released just before we hit record. Uh, stablecoin firm Circle.

confidentially files for a US IPO. I guess it's not confidential anymore. This is being reported on X. Anthony, was this expected? Circle doing an IPO sometime this year?

Yeah, I mean, they've been talking about this for quite a while. This is not a shock or a surprise, really, to anyone. I mean, it shouldn't be because, as I said, it's been talked about for quite a while. I think maybe they were waiting for market conditions to improve across the board for crypto to obviously get more interest in their IPO, just like how Coinbase basically went live at the top of the last market. They're they're kind of uh they did their IPO at the top of the last market. Um, yeah, I'm not sure when Circle would do this, but it makes sense for them to do it. I mean, obviously USDC is the second largest centralized stablecoin out right now, and that's they're trying to continue growing that. It did have a bit of turbulence last year, obviously, with the with the DPEG, and it has obviously lost some market share because of that. But they are really well positioned, I think. And you know, IPOing obviously is something that's been on the cards for a while, and and I guess like doing it when the market's good is better than doing it when the market's bad.

Probably good to have uh the legitimacy going through the SEC in case the SEC tries to pull USDC's uh you know a security or something like that in the future as well. Um, Anthony, this um popped by my desk this week as well. The idea of Eigenlayer coming to Cosmos. And the question I think that this potentially answers is what if we used Ethereum's economic security to actually secure the Cosmos chains? So I've been um interested in the Cosmos community, you know, since probably in 2017, 2018, as this idea of interoperability uh network. But the one thing that never made sense to me was how they were going to secure um all of these various app chains because every single uh Cosmos chain, you have to kind of boot up your own validators and boot up your own economic security. And therefore you have to boot up a token and the value of that token. Now that's very difficult to do, particularly if you don't have a monetary premium if your token's not money, right? And like most of these app chains is obviously not going to become a money. The idea with Eigenlayer is that you can actually export the Ethereum validator set and Ether as a security layer to Cosmos. I know um the Atom Cosmos Hub was trying to do this in the past with kind of shared security for multiple chains. It hasn't quite taken off yet. Um, what are your thoughts on this move by by Eigenlayer and the idea of Ether, kind of this internet bond being used to secure non Ethereum chains? Maybe it could just be Ethereum as the security layer for uh all of Cosmos or a big part of it.

Yeah, I mean, I've always looked at the Cosmos ecosystem as an ecosystem that has a lot of really great ideas, but also that has an asset that's not accruing monetary properties, which means a lot of those ideas cannot be materialized. I think that what a lot of people miss in this ecosystem is that once you have the money, you can have everything else that you want. Like everything just sprouts off of that. And there's only two networks right now that have the money. It's Bitcoin and Ethereum. Obviously, you can't do much with BTC. It's not programmable money, it doesn't have that functionality. So you're really only left with ETH. And because of that, we now have these services, obviously like Eigenlayer going live, that are going to tap into ETH's economic security and export that out, as you mentioned, to other services, whether they be Cosmos chains, whether they be uh kind of shared sequences, whether they be data availability layers. Uh, and they can only do this because of ETH, the asset allowing them to do this, as well as obviously Ethereum's validator set, which is in place because of ETH the asset being so so valuable and the Ethereum ecosystem being so large here. So I think that what could potentially happen here is that the Cosmos vision can get realized um in a much quicker and faster way than having to rely on the Atom assets, because obviously that asset has not accrued much monetary premium. It it really is an asset that's underperformed greatly through the market. And also, as you mentioned, these these chains no longer have to issue their own token and try to drive value to it or try to drive long-term value to it to secure themselves. They can just tap into Ethereum's existing kind of node operator set as well as Eats economic security, which is a huge, huge deal, uh, uh, I believe. So it's gonna be interesting to see how many kind of, I guess like Cosmos projects do this. But at the same time, uh, you know, we're gonna see an explosion of them. A lot of them are not gonna work out, some of them may succeed. But generally, I've been kind of bearish on sovereign chains, honestly, if I if I'm being honest, just because I think that layer twos are superior to them. But there may be some kind of niches where sovereign chains make sense, and then you've got eigenlayer that kind of fits in there instead of these chains having to spin up their own validator set, which people don't realize is extremely difficult to spin up your own decentralized, long-term sustainable validator set. The only network that has done that is Ethereum. Bitcoin is not sustainable right now. Bitcoin's uh validator set, its miners, um, are being paid out via network issuance, and the fees that Bitcoin takes in is nowhere near enough to cover that issuance. So if we're talking about sustainability, not even Bitcoin does it, only Ethereum does it. And we're exporting that to these other chains. So yeah, I think overall very bullish for the projects that succeed in this arena, but it remains to be seen like how many of those there actually are.

Uh a new kind of chain design is one exemplified by um uh Lyra, which uh tweeted this out this week. Lyra is going modular. We're upgrading Lyra chain, powered by the Optimism stacks as a roll-up uh-based stack, and then using Celestia for data availability, right? So that's kind of uh Ethereum for consensus, uh, optimism stack for kind of the roll-up itself, and then Celestia for data availability. This is um a tweet this is last month. DA cost 42 ETH for uh Lyra. Next month, DA will cost less than 0.5 ETH, 100x in savings. It's not just Celestia, of course. Eigenlayer is going to have Eigen DA, and there'd be many different uh DA layers as well. What are your thoughts on this kind of design and how does this impact um Ethereum? Do you think that this drives like a decrease in block space consumption of uh Ethereum and kind of like a decrease of uh the fee markets? Do you think this design will propagate and take off in many other places as well?

So I'm I'm generally a fan of these designs. They're basically called validiums. That's a term that people throw around where essentially you store the data off-chain instead of on Ethereum, because to be considered a full roll-up, you would have to store both your kind of like proofs and data on the same layer, which is layer one Ethereum. But I will kind of caveat that by saying, like, I think the idea is sound, but it should not be used to kind of equate, you shouldn't equate like a roll-up and a validium as if they're the same thing. Like there was that tweet you showed just before that MJS tweeted out with they kind of were describing the savings here. This is a false equivalence. There is not that there is savings, but it's not the same product anymore. If you're storing your data off-chain and not an Ethereum L1, you are no longer a rollup, which means you are no longer the same product as if you if you had stored it on Ethereum L1. So the way I frame this is that what MJS is doing here is saying, hey, today I have an iPhone 15 Pro Max. Tomorrow I have a $50 budget Android phone. They're the completely different products, right? So I don't like that framing of equating the two and saying that, oh, we have so much in savings. What you're giving up for those savings is Ethereum security, essentially, because you no longer have Ethereum securing and serving your data. You are now relying on a third-party data availability network. In this case, it is Celestia. So as long as people don't equate the two and don't confuse users like that, I'm okay with it because it means that obviously you're you're kind of making it transparent that they're not they're not equal, but that's not what that's not what's happening yet. So I was a bit disappointed to see that. But in saying all of that, as I said, I still think that the validium design is very, very powerful. Um, I don't really like it for DeFi products, to be honest. I think DeFi products should definitely be roll ups. But if you're talking about things like NFTs, uh, especially Immutable is doing a lot of work here with NFTs and doing validiums and stuff like that, social apps, those sorts of things, even payments apps, like low value payments apps, those things are fine to be validiums. But if we're talking like a proper DeFi chain securing potentially billions and tens of billions of dollars of value,

Like, I wouldn't be trusting storing the data somewhere else. I would want to try to put it on Ethereum. And you could afford to do that if you are obviously securing that.

Does your answer change if it's like Eigen DA, which is, you know, has different assurances than Celestia DA? It's kind of it's still backed by ETH, um, but it's kind of like some smart contract eigenlayer protocol sort of risk that that you're injecting. Um do you think that's

I mean, technically, it's it's still Ethereum. Like it's not backed by so it's backed by like ETH economic security and restacked validators, but it's still a separate network. It's not Ethereum L1, it's its own thing, Eigen DA. So my opinion would be the same, whether it's Celestia Eigen DA, I know Nia is doing the Avail, like um the project that spun out of Polygon. Like it doesn't matter. Like if it's not settling on the on the same network, you are now giving up security guarantees and giving up data availability guarantees in order to obviously have uh have have cheaper costs here. Um and as I mentioned in my analogy, you're not getting the same product. So I think that we shouldn't uh be equating the two as if they're the same thing. Um but in terms of how I would rank them.