ROLLUP: What Grayscale's Win vs The SEC Means For The Next Bull Market

What reinforces the hardening narrative is the ETF narrative. Because if they do get approved, it's going to be relatively close to the harvening. So let's say they get approved in Q1, right? They all just get approved in Q1. Uh and maybe later than some some people would expect, but they all have to get approved together because if they don't, then the SAC opens themselves up to more lawsuits. So that is Q1. And then April 2024 is the hardening. So you have ETF narrative into hardening narrative, which is going to, in my opinion, you know, be very bullish for the market generally. And then the flywheel starts from there.

Bankless Station, it is the last week of August, and it is time for the bankless weekly roll-up I have with me. Not David Hoffman today, but maybe the David Hoffman of the Southern Hemisphere. Anthony Sasano from the Daily Guay. Hey Anthony, how are you doing?

Hey Ryan, I'm going. Good. I've never been called the David Hoffman of the Southern Hemisphere.

Are you insulted? Are you complimented? Or is it something?

That was meant as a compliment, so I'll take it as a compliment.

Hopefully, bankless listeners will uh will take it as a as a compliment as well. And uh of course, Anthony, you've filled in so many times uh this summer for us as we've been on holidays. David's out at Burning Man, so he's not uh climbing a mountain this week, he's out enjoying himself at Burning Man, and I have no idea what shenanigans they get up to uh there. Have you ever had a desire to go to Burning Man, Anthony?

No, if if there's anything that is the complete opposite of a desire that I have of to do something, that would be Burning Man. It's it's not my scene at all. I uh I am not about that, but I think it's David's scene, uh definitely.

Yeah, I totally see David uh fitting in there. But yeah, I'm I'm like you. It's not my scene. Uh but Anthony, thank you so much for joining us today. We always learn something new about crypto, new about Ethereum, and and maybe if we're lucky, new about Australia. So uh I told you I was gonna be late to this episode, and you said no wookas. I think that's how you pronounce it. No wookas. And you said that means no worries. Am I getting this right?

So yeah, it's funny that you didn't pronounce it right. It's just great.

Right. I didn't pronounce it right?

No, no, so it said no wuckers. No wakers instead of wookers. Um yeah, it's just weird Aussie slang that some people use. I don't know how widespread it is, but I say it to my friends sometimes, like, yeah, no wakers. And I I feel like I had to explain that to you.

Thank you. Thank you. All right. Well, we got a lot to discuss this week, and including something bullish, which I'm glad you are here for something bullish, Anthony. Grayscale wins their court case. This is a U.S. federal court that rules that the SEC has no legal authority to block the Bitcoin spot ETF proposal. That is, of course, very bullish. We're going to talk about that. Also, X, formerly known as Twitter, obtained a license to store, transfer, and trade Bitcoin and crypto. Should we be excited by this? We'll talk about that. Uh Lido is almost at 33% of total staking market share. Anthony, I want to ask you about that if we should be concerned. And we've got some news about digital currency grip. This is DCG. Apparently, they agreed to deliver 90% of the value back to Genesis creditors. I'm kind of wondering if we finally cleaned up the mess from 2023. So we'll talk about all of those items and more as we get in. Uh, just want to set the tone here, Anthony. This ETF news. We'll we'll spend a lot of time getting into it. But does this make you bullish on the week? And and how how how bullish?

So I think generally I've always uh at least for the last few months uh kind of acted with the assumption that these ETFs are inevitable over probably the next kind of six to twelve months. So the grayscale win just further solidifies that for me. And I think what it also does uh for the wider kind of audience is solidify that for them as well. It basically says, yes, okay, the ETFs, you know, they've been teased for so long now. Many, many years there's been there's been kind of like teasing of a Bitcoin ETF in the US. And now it finally feels like that actually really gonna happen this time. And I think that this this uh recent win from Grayscale uh just kind of like solidifies that for a lot of people. So definitely bullish. Short term, you know, the markets are gonna do what the markets do, but I think that uh anyone doubting that an ETF is gonna get approved at this point, you know, I I wouldn't be taking that bet, to be honest.

Yeah, I I totally agree with you. And we'll we'll talk about that in a minute. And we'll also talk about how the markets reacted to that news, which was quite favorably. But before we get in, a message from our friends and sponsors over at all right, Anthony, let's get to the markets. Uh these are the charts that Kraken is showing us on the week. This is Bitcoin, and we are up on the week, my friend. Look at this glorious green candle right here. I think that happened around the time of the uh the ETF court decision that we were just talking about. So let me read out some numbers. We started the week at about 26,000. We are ending the week, at least at the time of recording, at 27,300. So we are up 5% in Bitcoin price. This green candle, is this all directly related to the um the court and the ETF ruling?

Oh, it's 100% correlated and related to that. And I think that it's pretty much mostly traders driving this as well. Because if you look at what the traders have been looking at over the last few weeks, all pretty much all of them have been talking about the grayscale decision because it'd been teased that every Tuesday and Friday people were checking the uh I think it was the SEC's website to, or uh maybe not the SEC's website, but a website that would show you the result of the lawsuit. Um and it wouldn't, it didn't come for like, you know, last Tuesday, last Friday, and a few before that. And then it finally came today. And yeah, every trader that I looked at was looking at the same thing. They're like, we're gonna go down. Maybe uh if nothing happens, you know, if it get if if Grayscale loses their case, we go down. If Grayscale wins their case, we go up. But whether that actually results in any kind of long-term sustained kind of um upward price movement, at least for the short term, it's hard to tell because I think I've I've been on here before and said to you uh last time we had a pump like this, which was the SEC case against Ripple, where Ripple won that case and we had that massive kind of pump on not just BTC and ETH, but everything else. And I said to you if there's no follow through, we're just gonna sell back down. And the follow through has to come from new money. Um, because if we don't have new money, it's just traders. And all the traders are going to do is they're just gonna short it back down because all they're looking for is that short term profit. They're not looking to invest, right? They're not investors, they're they're they're literally playing a different game to investors.

It's funny. That was uh the SEC Ripple Court uh case happened another week while David was out. Every time he leaves, something bad happens to Gary Gensler, and uh I don't know what he's off doing, but maybe he's like killing like uh hunting down horror cruxes or something. Uh but yeah, uh we need him to stay away for another week, and then maybe Gary gets fired. But so so you're just saying this this pump is basically traitor action. And what were going into this court case? Um, what were people thinking? Like, do you think people were over or under um Grayscale beating the the SEC? What were what were kind of the odds and the sentiment going into this?

I really do think it was a coin toss for a lot of people. You know, I think a lot of people in crypto definitely don't have a very good read of the legal world. I think they basically learn about it because of these crypto cases, and myself included, to be honest. I mean, especially in the US. I mean, I don't live in the US, so I'd never really had a reason to pay attention to it. So it's all new to me. So I kind of looked at it like that. I was like, you know, it's a coin toss. It's 50-50. I've got no idea. But then the judgment came out, and as we as we're going to talk about, and it and it really kind of was less than it was, it was sorry, it was much better than 50-50 in in odds of grayscale. It should have been like 90-10, you know, 90% that were going to win, 10% that we're going to lose, just based on the the kind of result there. But for traders, I feel like you, you know, you can see over the last kind of like week or two, it was just completely flat and just pretty boring. And that was because all the traders, I think, were waiting for this signal in particular, which is kind of wild when you think about it. But at the same time, there's also not much else going on, as as you know, we know there's not new money coming in right now. In terms of market activity, I'm not, I'm I'm the uh the innovation side and the technical side of things is different. But market activity, yeah, it's it's it's really just a kind of trader game right now.

Well, let's uh look at a few trader numbers too. ETH is up on the week. I believe we're at 17.15 at the time of recording. That's up two, two and a half percent. So uh up less than Bitcoin, as you'd expect. Bitcoin kind of reading leading this because this is uh about a spot Bitcoin ETF, but still up nonetheless. And uh total crypto market cap 1.14 trillion on the week. By the way, this is about a if we're looking at the the one-year view, a 12% increase on the year in total crypto market cap. But here are the charts that you were referring to that that maybe are uh even more exciting, and not just for traders, but for long time uh crypto settlers. This is L2 total locked value and uh the scaling factor for Ethereum. This looks at all of the the interesting metrics around our L2s, and you tweeted this out earlier in the week, Anthony. Ethereum layer two activity continues being up only. What bear market? And here you're looking at a chart from L2 Beat, which shows the scaling factor that is activity on Ethereum at a multiple of Ethereum mainnet of 5.24 X, which is absolutely massive. And you can see, I don't know what the time is this just the last. No, this is the the the entirety of the last year, and we've just had a 5x in transactions over the last year. Is that right?

Mm-hmm. Yeah, exactly. Well, yeah, I mean we're basically, you can see there's that blue kind of section there, the blue squiggly line. That's Ethereum L1 TPS, which isn't going to go up because Ethereum L1 is already at capacity. And then you've got the the red above it, which is showing all the L2s that L2B is tracking and their TPS just going up over time and get and and basically being up only uh over the last year, at least for sure.

Anthony, that that is an interesting question. Is like, so um what is the capacity right now for this for this red line? So of course, Mainnet, the blue line, has just 16 transactions per second. That's kind of the full capacity of Ethereum, then gas fees start getting wonky, and you know, we can't go uh over that. Um, but how about layer twos right now? Tell tell us about the the pre um proto dank sharding EIP um 4844 world and then the post one.

Yeah, so it's always a difficult thing when measuring TPS because uh not all networks are created equal, of course. And I think what L2B tries to do here is normalize the TPS as well because there are different kinds of ways to measure it depending on the layer two that you're looking at. So that's what they've done in this chart here. Um I I can't give you like an upper bound number um of of kind of total TPS across these L2s as it exists today, but I can say it's a lot higher than here. We're we're pretty much nowhere near capacity um from from from what I can tell and what I've what I've been able to research. Uh and then after EIP4844 goes live, that that goes up by at least 10x um from from kind of what I've seen here. And I also want to note about Ethereum L1, it's it's kind of funny when measuring TPS because the way Ethereum works is that uh, or at least Ethereum L1 works, is that it has what's called a gas limit, which is the block size of Ethereum L1 blocks. Now, this gas limit um is taken up by various transactions, and each of these transactions has a different amount of gas that it uses. So, for example, if all of the transfers on the Ethereum network, or sorry, all of the transactions on the Ethereum network were only ETH transfers, so transfers of ETH the asset to and from addresses and things like that, not smart contracts, just to and from addresses, the Ethereum network could do, I think, upwards of 40 transactions per second, just doing that. But because Ethereum L1 does a lot more than just simple ETH transfers, obviously we have smart contracts, we have DeFi NFTs, um, we kind of level out an average of you know 15, 16 TPS or something like that, because those other things take up more gas, which means that the gas limit fills up quicker per block by those transactions, and that's how the TPS is measured. The same is true for a lot of L2s as well, especially the ones that are EVM compatible or equivalent. Uh, but as I said, because there are certain L2s that aren't, like Starknet, for example, they're pushing like hundreds of TPS right now, but their TPS is measured in a different way that you would measure it on an EVM chain. And that's why I said that L2 beat in this chart tries to normalize it so that can it actually is as close to equivalent as like an L1 Ethereum TPS measure uh as possible.

That's a great point. Yeah, thanks. Thanks for getting into that too. It's something we often forget. This is also another screenshot from a new website that we just kind of uncovered. It's called growthhe.xyz. And this is another measurement of the layer two metrics. This is actually built by someone in the bankless community. So it's really cool to see this. But uh another resource for you in addition to L2 Beat. Anthony, let's talk a little bit about some of your predictions, actually, because this was a tweet thread that I came across and wanted to include in the market section. And now that we have you as a co-host this week, makes even more sense to talk about it. You said earlier in this week, it was Monday, GM bulls and happy Monday. I know that it may seem dark and gloomy in the markets right now, but there are always bright spots over longer time periods. And I'm here today to share some of them with you. And so then you go over some of those bright spots over the next 12 to 18 months. Um here are the outsider bullish narratives. You mentioned the Bitcoin havening in April 2024, the potential ETF bonanza, which maybe that it's it's interesting because that prediction's already coming true. You said this on Monday, and now by uh Wednesday, we have this fantastic ETF news. Um ETH staking becomes very attractive to TradFi because of the passive income yield. There's some positive US regulatory stuff, maybe a stablecoin bill, which is kind of interesting because we've had a lot of bad regulatory news up to this point, I would say. And maybe you're you're saying that's going to start to shift. TradFi companies keep playing with and adopting crypto, Visa, and PayPal. These those are uh recent examples. Those are all of the outsider bullish narratives. Then we could get into the insider bullish narratives. But let me just pause. You're feeling bullish, it seems like, Anthony. Tell us about the big picture and then uh any of these outsider bullish narratives that you think are most relevant right now.

Mm-hmm. Yeah, I'm I'm definitely feeling very bullish for the next kind of 12 to 18 months, especially. I have kind of operated under the assumption for this year, 2023, that we're basically just replaying 2019 in terms of kind of market action, general sentiment, all the stuff that happened in 2019 that laid the groundwork and kind of like the bedrock for the bull market of 2020 and 2021. And I'm feeling the exact same thing play out right now. So if you were to take that to its kind of logical conclusion, you would say that 2024 is like 2020, and then 2025 would be like 2021. Hopefully with a lot less fraud. Uh, because unfortunately there was a lot of fraud that ended up happening in uh the last bull market led by of of course uh SBF and some other kind of uh actors in the space. So I looked at the kind of the big picture here and kind of tried to articulate why I'm bullish and bucketed it into two categories that you mentioned: the outsider bullish narratives, which are things that the outside crypto people can get excited about, the things that are easily digestible, the things that we don't have to spend, you know, a whole hour explaining to people for them to actually understand what's happening. Um, and then the insider narratives. Now, the cool thing about the outsider uh narratives is that the crypto natives can also get excited about the outsider narratives just as much as they can get excited about the insider ones. So we get like a double whammy by being crypto natives. But on the outsider ones, you know, I looked at the obvious things. The Bitcoin harvening, it's it's kind of a meme or a pretty strong narrative that after every halvening, the market pumps, right? BTC pumps, and then we get a bull market within basically six to 12 months of that happening. And that has happened every time so far, 2012 into 2013, 2016 into 2017, 20 uh 20 into 2021. So it feels like we're on track for that to happen again. But what reinforces the harvening narrative is the ETF narrative. Because if they do get approved, it's going to be relatively close to the harvening. So let's say they get approved in Q1, right? They all just get approved in Q1, uh, it may be later than some people would expect, but they all have to get approved together because uh if they don't, then the SAC opens themselves up to more lawsuits. So that is Q1. And then April 2024 is the hardening. So you have ETF narrative into harvening narrative, which is going to, in my opinion, you know, be very bullish for the market generally. And then the flywheel starts from there. So I think those.

Can you imagine? Could you imagine, Anthony? So like BlackRock gets their ETF approved, then into the havening, and then they're starting to pump the the the havening meme. I mean, that's something that could happen, right? In order to attract to the new BlackRock ETF.

The thing about the ETFs is that there's not just one of them. And I think this is important for people to kind of keep in mind. There are multiple uh ETFs and they're all competing with each other. And the start of the product is the most important because they want to show that they get the most inflows, right? Like you want to show that you're the market leader. So what are you going to do to do that? Well, you're going to start now. You're not going to start when it's approved. You're going to start now reaching out to your clients, reaching out to your high net worth clients as well. And you're going to be telling them, hey, you know, there's this thing happening, there's this thing happening, the hardening, blah, blah. And you're going to give them the bullish pitch because you want them to put their money with you as soon as that ETF gets approved because you want to be the market leader so that you can just start that flywheel of getting more money in. So that's a great point.

I had not put that together, this kind of this stacking of of timelines here, but you're exactly right. I it almost seems like it's orchestrated. Uh

Quite brilliant. Some people said that to me. They're like, it almost seems like the whole thing's just manipulated and orchestra. And I'm like, it it does to an extent, but then you also need to consider that the four year cycle is also the political cycle in the US, right? Yeah.

Next year's election year. I actually think Satoshi did this on purpose, to be honest. Um really? So yeah, I I have a I have a thesis that's never going to be proven or disproven, obviously, because we don't know who Satoshi is. Timing it with election

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years. I feel like the timing is on purpose because election years um are always kind of, I guess, like a pretty fun year. Let's just put it that way. I'm not gonna get into politics here. And and and it just it all lines up too perfectly to me. One is one word.

for it, Anthony. You could say that when you're not living in the US.

Yeah, exactly, exactly. And I and I think that these other things around it just act as more positive narrative catalysts because the narrative is what matters for for the market, at least over kind of like the bull market period. The fundamentals don't kick in until like the longer term. And I think the narrative is going to be very, very strong next year. At least, you know, the outsider narrative, but also the insider one. But that's my general view on the outsider stuff.

Okay, that's the outsider stuff. Uh Bitcoin ETF and the happening, a big thing here. We also talked about some some positive US regulatory headwinds, the stablecoin bill could totally see that. And we've talked so much on the roll-ups about Visa and PayPal now has a stablecoin. But but this point on the outsider bullish narratives, I want to dig into for one more uh second here. Um ETH staking becomes very attractive to TradFi because of the passive income yield. So, you know, everything you were just saying about kind of like the black rocks of the world and Wall Street getting on board here, that was all Bitcoin related. But you also think simultaneously they will start to understand, TradFi will start to understand ETH staking. I mean, I think I believe that too, but I'm wondering if you have any like evidence for that or any thoughts on why that happens.

So I think that there are already kind of Tradfire players getting involved with ETH staking, uh, to be honest. They're definitely doing it through the providers that uh KYCing them and things like that because they have to due to regulations. So you're not gonna really see it. You know, they're not gonna go with Rocket Pool, for example, at least not right now, because they probably just legally can't. Uh they may not even be able to legally go with Lido, for example. So they're probably going with these other providers, maybe Coinbase. There's Alluvial that recently got announced, they're targeting more of the kind of like enterprise kind of stuff there. Uh, but just generally, Tradfy loves yield because they can sell that product to their customers very easily because customers love yield. You know, there's this obsession that people have with yield, and I get it because it's it sounds nice. Um, but I have my own opinions on yield generally, but I'll leave those on the table. Uh, but but generally, I think when it comes to ETH staking, what people forget is that in a bull market, the yield is gonna go up because we're gonna get more activity on the chain, which is gonna result in more fees, which is gonna result in more yield for all the stakers, which is gonna result in a flywheel of people being like, holy crap, the yield's so high, I need to stake, right? And we're gonna get such an inflow of ETH stake. And um, I do believe we're gonna get an ETH ETF as well. I don't know how long after BTC gets approved, we'll get an ETH one. I can't imagine it's gonna be very, very long after that. And that number one selling point that these kind of ETF issuers are gonna say about ETH is staking. They're gonna they're gonna pump the hell out of staking. I I'm very confident in that.

Yeah, it would be it would be wild if we Bitcoin ETF approved, uh get Gensler out of office, you know, something happens with kind of the elections, and then 12 months later you have uh an Ethereum ETF approved. Okay, let's talk about some of these insider bullish narratives. These are the ones for us that the outside world doesn't really know about. Um, the overall four-year cycle timing is still playing out nicely, and only maybe gets invalidated if 2024 is another crab year, in my opinion. That's your opinion. So what's interesting is uh you you just think the four-year cycle, we're on repeat yet again. And some people always the criticism against that is like it can't be that easy, Anthony. Like, come on, man. Like that's just we we like to overcomplicate our investment thesis in crypto a lot and think we're very smart. And so they can't see history repeating. What for the fourth time is this? Um, you also also say Bitcoin actually pumps again after the happening, layer twos continue taking off. We get a proper layer two summer. So we haven't seen a layer two summers, is what you're implying. Decentralized social platforms, uh Ethereum's drastically improved supply dynamics finally kind of like kick in in the way like we we I feel like they should have kicked in more and they haven't fully kicked in. I think that's what you're implying here. Well Dex volumes, ETH burn goes nuts. Yeah, give us the highlights from the insider narratives here.

Yeah, I I want to hit on that kind of like supply dynamic thing. I think that they have played out in the bear market, but they've played out in a different way than what people expected. So they played out with ETH going down only a little bit against BTC, uh, this bear market. Whereas last bear market, ETH went down 90% against BTC from its top. 90%. So if you put 10 BTC into ETH at the top, you were left with one BTC at the bottom, right? That is a substantial loss. The difference here now is that ETH is only down 25% against BTC, this bear market, which is substantially different. Now I chalk that up completely to ETH's drastically improved supply dynamics and its monetary policy with the merge issuance reduction and the burn, which has further and staking, of course, which has further strengthened ETH's store of value properties, which is all that matters for value accrual uh for at that size. Um, store of value and money is what BTC and ETH have going for them. And ETH has proven this bear market that it has achieved a very strong store of value property and it has out not outperformed BTC, but only underperformed it by a little bit. Um then going

That's a great point. So you're sitting you're saying basically last cycle, and people don't remember this. Last cycle, 2018, last last uh bear market, ETH got absolutely freaking slaughtered. It got destroyed along with all of the alt bitcoins, you know, the altcoins, right? Of of that cycle. This time it was alongside Bitcoin a flight to safety asset for crypto. Exactly. And it slurped in all of that liquidity. And that is so different from the last bear market. I I don't think I I properly took time to reflect on that, but you're absolutely right.

Mm-hmm. And then similarly, in the in the bull market, when demand comes back, I really do think that's going to play out in a really positive way for ETH because there's just not going to be that much ETH to buy. And the narratives for ETH are really, really strong. Obviously, BTC has a strong narrative with the ETF happening right now. But I think the I I like to bucket these into two different kinds of things. I think the ETF narrative goes into my bucket of impulse narratives where an impulse happens, the news happens, the price impulses up, but then it kind of fades away over time and it doesn't keep doing the impulses because people get over the news, right? It's kind of like whatever, the news is the news. We bought the news, now we have to wait for new, new kind of news and narratives. And the narrative kind of loses steam. But there's another bucket, which is the fundamentals bucket, right? Which is exactly what ETH has with its change supply dynamics, which play out over the longer term. And you can actually see this on ETH BTC, especially recently. Um, you know, we especially over the last 24 hours. I know this is short term, but this illustrates my point. ETHBTC went down because BTC impulsed up on the uh grayscale news, right? But then ETH BTC has just started kind of like cruising a little bit back up again since then over the last kind of like 12 hours because the impulse is kind of over. And now we're just going back to the fundamentals. So if ETH is going up against BTC based on fundamentals when and and the demand is just there when the demand comes back in, you can imagine a world where ETH BTC just continues going up only um uh over time. And even potentially next bear market, maybe ETH is the one that outperforms BTC and BTC goes down against ETH, and ETH becomes that kind of like top flight to safety asset.

The real flippining finally happens. Uh Anthony, kind of the the last point here on the markets that we want to touch is this idea of um layer two summer. Okay. And so you're you're analogging this to the to the previous bear to bull cycle, right? You're saying this is 2019, right? And let's let's go with that narrative for a while. So we had our DeFi summer in 2020, and uh that was kind of the year after, right? And you you're analoging this and you're and you're saying you're analogizing this, and you're saying now we might get a layer two summer in 2024. I think that's what you're saying. So DeFi being kind of the new layer twos. It's also interesting here where you you talk about decentralized social platforms. Well, maybe that becomes the new kind of NFT of the of the previous cycle here. Um I want to provide some maybe thoughts around this or other numbers that that we see on the week. Base is the fastest layer two to 100,000 users. This is a Delphi digital tweet. This milestone was reached just 56 days after launch. So a lot of users flocking. This, of course, is measured by um daily active unique addresses, of course. Um, this is uh Hasu saying rule number one, you always underestimate the importance of distribution, even when you know rule number one, and try to keep it in mind. I'm actually not totally sure what he's saying there, but um Fiscanti says this is wild given there was no expectation of an airdrop or base token. That's what's very interesting about this rapid uptake, is that there was no token to provide juice, and yet it got to a hundred thousand uh users in record time. Do you think this sets us up for an L2 Summer that is similar in some respects to DeFi Summer? And you know, t tell me a bit about that too.

Yeah, so my whole kind of thesis on an L2 summer revolves around, I guess, maybe two main things. The first thing is that L2s are finally here and usable, and we have big institutions like uh crypto institutions like Coinbase building their own and making it really easy to bridge into these things. There's liquidity on them, uh, there are apps on them. Uh, it really feels like the you know, uh a lot of these top L2s are just like L1 in terms of liquidity, the apps that are on there. Obviously, there's more liquidity on L1 still, but for the smaller players, definitely probably enough at this point on these platforms. And the and the second thing is just fresh money coming in. Now, fresh money can come from various different sources. It doesn't just have to come from the outside kind of new money that's not in crypto right now, maybe it's sitting in a bank account earning some yield, and then they come back into crypto. Fresh money can come from other ecosystems and also from people who haven't actually come on chain yet. And that's my real bull thesis for L2. And this is the same thing that happened in DeFi Summer. It brought people who had never come on chain, they were in crypto. Maybe they held some ETH on an exchange, they held BTC on an exchange, and they saw what was happening in DeFi Summer and they said, I want some of that, right? So they brought their ETH on-chain, they learned how to use MetaMask and other wallets, they learned how to put liquidity into Uniswap pools, they learned how to yield farm, they learned how to do all of these things, and we got the birth of DeFi, and DeFi has just kept innovating and growing uh since then. And I think similarly with L2s, you're gonna get the same thing where people are gonna be like, what we saw recently with friend tech, they're like, I want a piece of that, right? I really want to get on chain and I want to get in amongst this excitement that's happening right now. And I think that just by the sheer number of L2s that we we have going live and that are live right now, the apps just scrambling to get on to get onto these things because they know that's where the users are gonna be. The ports of entry becoming a lot easier because obviously, you know, Coinbase supports direct bridging into base, it's really cheap. It costs like 10 cents or something. That's gonna get cheaper over time. All of that is gonna bring uh more money on chain. And also the the outside money is also gonna come in and they're probably gonna skip L1 and just go to L2. So I think that that's all setting it us up for when the market heats up and that new outsider money comes in. We could potentially see a proper layer two summer where things just go go nuts. And we could potentially see new layer twos launching and within one day getting 100,000 users, not 56 days.

There you go. A lot of reasons to be bullish, maybe right now. Or the setup is here. If you are both an outsider, you've got some narratives, and uh if you're an insider, you've got some as well. But Anthony, we got a lot more to talk about. Coming up, that big L for Gary Gensler and the SEC. The U.S. court said the SEC was wrong to deny the Grayscale ETF. We'll talk about that. There's also an SEC enforcement action against an NFT company. We'll talk about that. We'll talk about all that and more when we get back. But first, we want to take a moment to thank our sponsors for making this possible. Grayscale just won a monumental legal victory against the SEC and the entire crypto industry, including you and I, Anthony. We've got a lot of cause to celebrate. Um, this was the fight for a Bitcoin spot ETF in the US. And this is not, we can't declare mission accomplished final victory, but this was a major step forward for Grayscale and crypto to get a spot Bitcoin ETF approved in the US. Maybe just before we get into this, uh, some context, what's your take, Anthony, on why doesn't the US already have a spot Bitcoin ETF? I mean, Europe has one, Canada has one. I don't know if Australia has one. Lots of jurisdictions have one, the US doesn't. Why?

So I think in recent times it's because the SEC has just waged this war on crypto. Um and I think this and by recent I mean over the last kind of like few years, it seems. They typically have kind of cited concerns around market manipulation and things like that, which I don't think that holds much water. And then they would they would kind of cite concerns around custody. But we have Coinbase as a custodian who has been operating like that for over 10 years now and has never been hacked, right? And they have the best in class custody you're probably ever going to get from a crypto custodian. So really, I I don't think there's any reason for them to be denying these things outside of personal bias and and just not wanting to see this happen. And that is pretty much I think what the judge has actually said here as well.

Yeah, the judge used these words, uh, arbitrary and capricious to define uh what the SEC was doing and uh SEC leadership was doing. If you just need a definition of what capricious means, given to sudden and unaccountable changes of mood or behavior, I love that unaccountable changes of mood and behavior. And that's what the SEC has felt very much to, I think the crypto community and a lot of retail investors is they're just not a cat, like everyone wants a Bitcoin ETF. I can't think of anyone who is a retail investor who doesn't want this. If you just because the product exists doesn't mean you have to buy it, right? And so why are they restricting this choice? I think I I go back to, and I agree with you, Anthony, that it's it's largely why don't we have a spot Bitcoin ETF? It's because Gary Gensler doesn't actually want it. So um this was a decisive ruling that happened. Uh the judge of a DC Circuit Court of Appeals ordered the SEC to vacate its own order, denying Grayscale's application. And what they were trying to do here, this was Grayscale applying to convert their GBTC um trust into an ETF, which would also solve a whole number of other problems, right? Because there are a lot of retail investors who actually own GBTC, and that is trading down and and lower than spot um Bitcoin. So it's a very inefficient market. Um so

And the SAC approved that product, by the way.

Yeah, it doesn't make any sense. Uh, so anyway, this is a big setback, a big L for Gary Gensler and the SEC, and a big win for Grayscale and the crypto industry. This was actually interesting as well. Not only was it a pushback uh of the SEC, they actually the court actually said the SEC violated the APA Act, which is the Administrative Procedure Act. If you look this up, Anthony, the APA is actually a set of laws that all federal agencies, so you know, if you're like the EPA or the FTC,

or the CFTC or the SEC, not just financial, but all U.S. government agencies.

They're required to abide by a set of laws in terms of their process for rulemaking, right? They cannot be arbitrary and capricious, right? You know they they they have to actually abide by a set of standards when doing this rulemaking. And the court said they didn't. Uh it's very rare for a court system to actually side with a uh lawsuit and find a regulator in violation of the APA. So not only that is this a big loss in this specific issue, I feel like it's a it's a major drain on SEC credibility, right? And I've gotta think, Anthony, that's gonna come back to bite uh Gary Gensler. You you have to start to wonder how long he's going to keep his job. This is Jake Czervinsky saying Grayskill's victory over the SEC is massive. He also echoes it's very rare for a federal circuit court to find that an agency has violated the APA by acting arbitrarily and capriciously. Uh the DC court just delivered a huge embarrassment for the SEC. And then he goes on and says, but the ETF isn't approved yet. Uh yeah, so what's what's your take on all of this so far?

Yeah, I I mean uh the point about the SEC's credibility is a good one because I would say that right now the SEC's credibility is pretty much almost zero, right? It's like Terra Luna after it crashed. Um, it's just gone to zero. Uh because they haven't really protected anyone. All of the settlements that they do just seem like protection money that they're taking in, right? They'll they'll they'll they'll sue someone for doing something and then they won't go to court because that someone or entity will be like, well, it's better for us to pay this fine, which is normally less than the money that they actually raised from the alleged unregistered security sale, right? Um, then go to court. But it seems like every time that the SEC goes to court, they lose. You know, they lost the Ripple case, they lost this case. Are they going to lose the Coinbase case? I mean, there's a very good thing. Maybe they like lose.

I don't know.

Yeah, yeah, exactly, exactly. So the SAC's credibility, I think, is very low right now. As you said, like it begs the question like how long is Gensler going to keep his job? I think that it's of a lot of politics going on, obviously, because Gensler is a Democrat appointee. The Democrats don't want to be removing one of their appointees, you know, like that, or at least firing one of their appointees like that during, especially during an election year, obviously, as I was saying before, uh next year it doesn't make them look very good. But it could be kind of like a graceful exit thing where they kind of promote him to another position and basically say that, oh, you know, he's been promoted and we're replacing him with someone, you know, better or something, right? So yeah, just generally, um, uh no one in crypto definitely thinks the SEC is a credible agency at this point with Gary Gensler at the helm. And I think outside of crypto, even the Tradfy people that I follow also think that uh Gary Gensler's war on crypto is based on nothing uh and is really against the law.

Yeah, so I as happy as it would make me for Gary Gensler to exit his position, that that might not be what actually happens. But this whole thing could paw could cause him to pause and take a step back. Or he could completely go to war and double down. Maybe he has the political backing in order to do that. This is Jake Travinsky again. One theory on where the SEC will go from here. One theory is that the SEC will just pick a different reason to deny Grayscale's proposal and force more long and costly litigation. They could do that, Anthony. That's possible, he says. It's hard to understate the extreme hostility of the SEC leadership towards crypto. Will Chair Gensler really accept this loss? Maybe he'll feel like backed in a corner and want to double down on his position. But another theory, Jake says, is that the SEC will take the DC circuit court's decision and do a semi-graceful exit from their anti-ETF position. Jake says, I'm in this camp. It's the right move. We disagree, they could say, but we're following the law. It's that's an inconvenient excuse to back out of a losing battle. So hopefully they choose to, they're they're in this place on the check in the chessboard where they're in check right now. And hopefully rather than kind of like doubling down and losing the game, they actually just back off. Um Jake says there's also political pressure on the SEC to prove the spot Bitcoin ETFs, not just about grayscale. All of TradFi is ready for a Bitcoin ETF, including BlackRock and Larry Fink, who also you mentioned the Democrats earlier. He throws some pretty heavy punches in uh Democrat circles and um political D DC. Uh Jake.

Concludes this thread. I have no doubt that we'll get a spot Bitcoin ETF sooner or later. The only question is how painful the SEC wants to make it on themselves. I strongly recommend the SEC picks sooner rather than later. We'll see. This is um what we're seeing in mainstream coverage. This is a ABC News. Bitcoin ETF appears to be on the way after court hands the SEC a stinging loss. That's what the normies are saying, Anthony. They're saying this is a stinging loss and that the ETF is on the way. So um they're seeing it too, I guess. All good news from here. And also to the point you made earlier, there are a lot of ETFs that have applied that are due for rulings in the coming weeks and months. So many, I can't even keep track of them, honestly. But there's Bitwise, there's BlackRock, there's Van Eck, there's there's Wisdom Tree. I think there's Kathy Woods, Arc Invest. There's just a whole line of them. And um, you know, they these will come out over the weeks to come. We had an expert on uh Bankless recently, uh James Seffert. He is a research analyst at Bloomberg. He tracks all of these things. And his prediction was possibly by the end of the year we get this, but more likely in Q1 of 2024. That's when some of all of the dates kind of converge and uh the bill really comes due. And the SEC is essentially forced to uh either approve or you know, finally disapprove all of these applications.

Mm-hmm. Yeah, and I think um the thing that throws a little bit of a, I guess, like um, what's the term looking for? A little bit of a kind of uh uh a spanner in the in the works there is that the ARC ETF that you mentioned actually has a due date before Q1, like a final due date. Right. I don't know exactly when that is, but it's sooner. So the as I mentioned before, uh the SEC actually has to approve all of these things at once. They can't approve one and not the others because they're from my understanding, they're not allowed to be seen to be picking favorites. And if they do pick one, uh, like if they approve ARC and not the others, what ends up happening is that they open themselves up to massive lawsuits, which they're probably guaranteed to lose. And that's just even worse than the than the situation they're in right now. So two outcomes. The ARC ETF gets denied so that ARC has to refile so that um uh the SEC can approve all of the ETFs next year in Q1, as we just mentioned, or they all get approved by the ARC date. I'm leaning towards the former more, um, just because I don't know, it makes for I think it's nicer to just approve them in Q1, fresh new year, right? Everyone's feeling bullish because it's a new year. Let's let's do that. But it could happen at the ARC date. Um, but I think the funny outcome will be that the ARC one gets denied, and then everyone's like, oh my god, all the ETFs are gonna get denied. But in reality, it's just because they want to approve them all in Q1. So that's another kind of little bit of a short term narrative to pay attention to.

That's a great point. Um, more on the SEC too. They just charged an LA based media and entertainment company called Impact Theory, which I've never heard of, for unregistered offering of NFTs. I don't know if you you took a look at this story, and what was your take on

Yeah.

I want to just quickly uh uh note it note the headline here. An unregistered offering of NFTs, as far as I know, is not a thing. There is no way to register an offering of NFTs, right? So if what they're doing here is that they're trying to frame that all NFTs are securities by saying this, right? The the headline should have read an unregistered offering of securities, not of NFTs, because there the SEC has not been able to kind of like state or prove in in law that NFTs are all securities. So they're trying to basically just do their regulation by enforcement um thing here, uh, which is just crap. And I really hate the fact that they did this headline because it just speaks to the fact that they're still stuck in their ways. Um and I I really want that to change, but we'll have to we'll have to see.

Yeah, the framing was wrong. Uh certainly her Hermione Wong agrees with you. This looks like a naked

I got it from her. I got it from her actually. I didn't know if you had this thread here up, but yeah, she says the same thing.

Yeah, I um I I think that's true. Now I will say that um this actual security offering disguised as an NFT or kind of tokenized as an NFT actually does appear to be uh clearly a security, right? I mean they raise

Yeah, I mean this was a really dodgy project that's