One of the world’s largest asset managers momentarily delighted Bitcoiners today when it released a three-minute advertisement for bitcoin (BTC). Just 90 seconds into the video, however, delight turned to dismay when viewers spotted BlackRock’s finely printed supply disclaimer overlaid atop an otherwise glowing overview of the currency’s monetary credentials.

In the video, which was amplified by MicroStrategy Chairman Michael Saylor, BlackRock disclaimed, “There is no guarantee that bitcoin’s 21 million supply cap will not be changed.”

The disappointment at the sighting was palpable. 

Bitcoiners labeled it “misinformation,” “FUD,” “underhanded,” “laughable,” and a homophonic euphemism for retarded. The topic immediately trended on X.

Unbeknownst to most Bitcoiners, that disclaimer is also present in BlackRock’s prospectus for its spot BTC ETF. IBIT, the world’s largest spot BTC ETF, discloses various risk factors to investors in its Securities and Exchange Commission (SEC) filings. One of those risks is that the supply of BTC might increase beyond 21 million.

“Although many observers believe this is unlikely at present, there is no guarantee that the current 21 million supply cap for outstanding bitcoin, which is estimated to be reached by approximately the year 2140, will not be changed. If a hard fork changing the 21 million supply cap is widely adopted, the limit on the supply of bitcoin could be lifted, which could have an adverse impact on the value of bitcoin.”

-BlackRock

It’s a remote possibility– so remote as to be “laughable” or “FUD,” according to some — yet BlackRock’s lawyers consider it pertinent to an average investor’s decision-making.

How would bitcoin’s supply exceed 21 million?

The first possibility of a supply increase is a bug. There were a few hours in Bitcoin’s nascent history, for example, when the BTC supply briefly exploded over 184 billion. Satoshi Nakamoto corrected that August 2010 bug, known as the “value overflow incident,” within hours.

Patched up and operating smoothly ever since, it’s hard to take the threat of any new bugs seriously — especially with a $2 trillion prize attached to any successful hack.

Nevertheless, although BTC’s supply has continuously remained below 21 million for more than a decade with no foreseeable inflation bugs, it’s technically possible that someone might exploit an esoteric bug in the future and briefly alter its supply.

For this reason, BlackRock must legally disclaim the 21 million supply cap of BTC. In its IBIT prospectus, BlackRock notes on page 57, “the 21 million supply cap could be changed in a hard fork.”

Read more: Did Michael Saylor pay Bitcoin developers to stop working?

If not an inflation bug, then a voluntary fork

The second possibility for breaching BTC’s 21 million supply cap is a voluntary hard fork.

BTC’s maximum supply is rigid, with zero tail emissions. One researcher estimates it at 20,999,817.31308491 or less. However, there have been various proposals to increase the quantity of circulating BTC via a voluntary fork, such as Peter Todd’s tail emissions proposal.

Tail emissions are a type of proposal that would financially incentivize miners when Bitcoin’s mining reward drops to zero in the year 2140. Although most variants of tail emissions propose recirculating provably burned or unspendable BTC into mining rewards — thereby honoring the 21 million cap — some variants of tail emissions propose lifting the supply cap slightly in order to incentivize miners to secure the network beyond 2140 if transaction fees do not sufficiently subsidize miners’ electricity, machinery, and effort.

However, there are vanishingly few Bitcoiners who currently support any version of tail emissions that exceed BTC’s current supply cap.

There will never be more than 21 million bitcoin.*

Operators of nodes around the world enforce the current version of Bitcoin’s mining rules. Anyone who tries to validate a block or transaction that doesn’t comply with BTC’s 21 million supply cap will be rejected by the vast majority of these nodes.

With over 15 years of consistent enforcement of this supply cap, there are very few people who think BTC’s supply limit will ever change.

There are at least 67,000 nodes around the world that enforce BTC’s 21 million supply cap, and about 19,000 are online and reachable at any given moment. All of them stand guard to defend against any breach of this ceiling.

*From the perspective of a BlackRock lawyer, however, they would still prefer to note the risk — even if it is in fine print.

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November has marked the arrival of a new class of bitcoin investor. Just as the progressive introductions of custodial exchanges, publicly-listed trusts, futures, and spot ETFs ushered in new types of capital allocators, this month is a peak for a different type of bitcoin product: corporate leverage.

This week alone, four public companies have added billions of dollars in collective debt to their balance sheets in order to buy bitcoin: MicroStrategy, Marathon Holdings, Semler Scientific, and MetaPlanet.

In addition, Blackrock suddenly announced the listing of options — yet another form of leverage — atop its flagship spot bitcoin ETF, IBIT.

The introduction of options on Blackrock’s institutional, marginable, price-tracking ETF will allow sophisticated market participants access to powerful hedging strategies. IBIT options are scheduled to commence trading on NASDAQ today.

For context, bitcoin has rallied 32% since the start of the month, and corporate leverage is only a part of that mix.

MicroStrategy’s $42 billion and Donald Trump ignite November rally

Initially fueled by MicroStrategy’s noteworthy $42 billion capital allocation plan — doubling the company’s market capitalization as of the time of the announcement — it rocketed even higher on the evening of November 5.

The re-election of Donald Trump, who made various pro-crypto promises for his upcoming term, earned cheers from millions of bitcoin investors and an 8% rally within 24 hours.

Read more: All bitcoin models destroyed: Stock-to-Flow, Power Law, Rainbow

Both MicroStrategy CEO Michael Saylor and President-elect Donald Trump have made good on their considerable promises for the past two weeks. Saylor closed billions of dollars of his convertible debt round to buy tens of thousands of bitcoin, and Trump has announced various pro-bitcoin appointments to his administration.

This week, at least four public companies are actively tapping corporate debt markets to leverage their own balance sheets for bitcoin exposure. This also allows bond traders — yet another class of investor — to gain exposure to bitcoin’s price via convertible, option-enhanced, or warrant-covered commercial paper.

With Blackrock’s listing of IBIT options as an additional hedging option on the NASDAQ this week, a new era of leveraged bitcoin trading fueled by corporate debt has begun.

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Although the price of bitcoin stole the show during Donald Trump’s re-election, its rally also lifted a number of other key metrics. Coinciding with an all-time high in price were bitcoin’s resurgence to all-time high futures transactions, spot ETF inflows, options volume, exchange trade volume, total circulating bitcoin, total value locked, and total hash rate.

These are the eight metrics that took the Bitcoin network to an all-time high beyond its USD price.

All-time high bitcoin daily spot ETF inflows

As bitcoin rallied on enthusiasm for Donald Trump’s incoming presidency, traditional investors who prefer exchange-listed products also placed plenty of buy orders. 

After adjusting for a one-day anomaly of Grayscale trust-to-ETF asset rotation during the debut of spot bitcoin ETFs, US-listed spot bitcoin ETFs enjoyed their highest-ever day of capital inflows as bitcoin itself rallied past $74,000.

On a net basis, investors added $1.373 billion of capital to US spot bitcoin ETFs on November 7.

All-time high bitcoin options volume

Bitcoin options volume also hit a new record this week. According to data aggregated at Coinglass, $2.47 billion worth of bitcoin options traded on the currency’s largest options exchange on November 7. 

CME, Bitcoin’s second-largest options exchange, posted record-high volumes just prior to the election: $528 million on November 2.

All-time high bitcoin open interest

Bitcoin open interest on options contracts also hit an all-time high alongside their underlying asset. On November 7, bitcoin open interest aggregated at Coinglass totaled a staggering $32.57 billion.

Read more: CHART: Bitcoin could have turned your $1,200 stimulus check into $14,000

All-time high bitcoin futures transactions

Transaction volume for another bitcoin derivative also hit a record this week. On November 6, 29,081 futures contracts traded hands ahead of bitcoin’s front-month, November 2024 expiry on the CME.

All-time high bitcoin exchange trade volume

Total trading volume of spot bitcoin across major bitcoin exchanges also hit an all-time high this week. On November 6, crypto exchanges reported $1.49 billion worth of spot bitcoin transactions.

All-time high total circulating bitcoin

Although easy to forecast given bitcoin’s predictable supply and issuance schedule, the total number of mined bitcoins that are circulating in the market reached an all-time high alongside the USD price of each coin. On November 7, total circulating BTC hit 19,778,915 — 94.1% of its supply cap.

All-time high bitcoin total value locked

Investors locked a record 39,790 bitcoin worth $3 billion in DeFi applications using Bitcoin’s blockchain per data from DefiLlama.

Read more: Jack Dorsey and Block abandon Web5 to mine bitcoin

All-time high bitcoin network mining difficulty

As a record bitcoin price incentivized more miners to join the network to earn block rewards, Bitcoin’s protocol has raised the mathematical difficulty of hashing a block of transactions.

As of November 7, the mining difficulty is at an all-time high of 101,646,843,652,790.

Difficulty is expressed as a regular number that simply describes how many times harder it is to mine a block compared to the easiest it can ever be.

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Since spot ether Exchange Traded Funds (ETFs) began trading on US securities exchanges, five days have seen precisely $0 of Ethereum capital inflows. Even worse, since July 23, 2024, owners of the nine spot ether ETFs have actually withdrawn money from those products.

Incredibly, because trusts and other investors seeded over $10 billion worth of spot ether into the ETFs prior to their debut on US exchanges, the tally of post-launch trading activity is negative $556 million.

‘Inflows’ is a term used to describe the net US dollar flow into spot ether ETFs. It excludes all other Ethereum-related purchases and sales such as futures, options, derivatives, or spot ether itself.

Investors track ETF inflows as a way to measure how much effect ETFs are having on Ethereum’s market capitalization independent of other variables. In this case, the answer is simple: Ether ETFs have not helped.

Ether inflows crash, billions behind bitcoin ETFs

Although US spot ether ETFs have been net negative since inception, spot bitcoin ETFs as an investment vehicle have been indisputably beneficial for bitcoin inflows. Although bitcoin holders might choose to sell other products and buy spot ETFs — a roundtrip of non-economic purpose — there is significant evidence that ETFs are truly contributing to bitcoin’s market capitalization.

Specifically, since spot bitcoin ETFs began trading on US exchanges on January 11, 2024, inflows have exceeded $18.7 billion. That compares starkly with spot ether ETF outflows of -$556 million.

The disappointment is even more bitter after a promising start. On their opening day, spot ether ETFs bested the debut of spot bitcoin ETFs. Soon, however, Ethereum gave up its initial lead.

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Institutional ethereum investment via ETFs reached a historic — and dismal — milestone yesterday when for an entire day on Wall Street, zero net new US dollars flowed into spot ether ETFs.

Known as ‘daily total net flow’ or simply ‘flows’ in crypto parlance, this metric sums the total amount of money invested into spot ether ETFs (inflows) against the total amount of money withdrawn (outflows) on a daily basis.

The intention of the metric is to communicate how much effect the spot ether ETFs — distinct from other investment vehicles like spot or derivative purchases — contribute to ether’s price on a day-to-day basis.

Calculations are typically in US dollars and take into account all purchase and sale transactions across the nine spot ether ETFs listed on US stock exchanges by sponsors BlackRock, Fidelity, Bitwise, 21Shares, Franklin, Invesco/Galaxy, VanEck, and Grayscale’s two spot ETFs.

Ether ETF flows have disappointed everyone

Monday’s figure of $0 contrasts starkly with predictions from bullish investors who heralded spot ether ETFs as the advent of institutional adoption. Market predictions included all-time highs of up to $15,000 per ETH. Today, ETH is trading around $2,400 — half of its all-time high.

In the first quarter following the launch of bitcoin’s spot ETFs, bitcoin enjoyed over $12 billion of inflows. Ether, disappointingly, has actually posted net outflows since its spot ETFs debuted.

Read more: Ethereum beats bitcoin first-day spot ETF inflows

Indeed, because Wall Street entities had seeded the nine spot ether ETFs with $10.2 billion of capital for their debut — most of which came from Grayscale’s ether trust — there was some money available to withdraw from these funds.

Taking that opportunity, investors have withdrawn capital from spot ether ETFs on a net basis since their US listings. Specifically, spot ether ETFs have shed $548 million in net outflows since July 23.

There are many reasons for investors making decisions about capital reallocation away from spot ether ETFs. One salient contributor to poor performance — in addition to ether underperforming bitcoin — might be the lack of yield in spot ether ETFs.

Large holders of ETH may earn 3.3% in native yield by participating in Ethereum’s proof-of-stake while most ether ETFs, in contrast, do not pay any yield and actually charge a management fee.

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Ethereum is approximately one-third the size of Bitcoin, and the debut of its spot ETFs was slightly less than commensurate by size. However, ether has outperformed bitcoin when we look at the absolute value of its net flows on the day of its ETFs debut. Ether posted a positive $107 million versus bitcoin’s decidedly negative -$1.5 billion.

First-day trading volume of Blackrock’s spot ether ETF totaled approximately one-quarter the volume of first-day trading volume of Blackrock’s spot bitcoin ETF.

Combined, trading volume for all nine spot ether ETFs totaled $1.112 billion yesterday — slightly under one-quarter the volume of all spot bitcoin ETFs on their debut day.

At the close of after-hours trading on US markets, net flow data was unavailable for two spot ether ETFs: Blackrock (ETHA) and Invesco/Galaxy (QETH). Excluding those two funds with unavailable data, most reporters went to bed reporting that money probably flowed out of spot ether ETFs. Net flows ex-ETHA/QETH totaled -$165.3 million. 

However, by midnight New York time, Blackrock and Invesco/Galaxy had updated their flow data. Impressively, Blackrock posted $267 million in net subscriptions, dragging the whole basket of ETFs into positive territory.

As of midnight, first-day spot ether ETF net inflows totaled $107 million. That significantly outperforms first-day spot bitcoin ETF net flows of -$1.5 billion.

Had it not been for Blackrock’s impressive first-day performance with its ETHA, more money would have left spot ether ETFs than entered those funds on day one. That net ex-Blackrock negative flow would have had a single explanation: Grayscale’s liquidity event.

Once-trapped ETHE investors breathe a sigh of relief

For seven years, most investors in Grayscale’s Ethereum Trust (ETHE) have not been able to redeem their shares for ether. Prior to yesterday, ETHE was not an ETF and had no daily liquidity or rebalancing obligations to align its share price with the actual value of ether.

Instead of tracking the price of ether, ETHE traded at various premiums or discounts to its net asset value (NAV). After initial years of irrational exuberance, ETHE has traded at a discount to its NAV since 2021. At its worst, on December 28, 2022, ETHE traded at a 60% NAV discount.

The same phenomenon occurred in Grayscale’s Bitcoin Trust (GBTC) which traded at a discount to NAV from February 2021 through its ETF conversion in January 2024.

Since November 2021, long-term ETHE investors have patiently waited for Grayscale to win its bid to convert the trust into an ETF. That wish came true yesterday. On cue, investors withdrew a stunning $484.1 million from ETHE — enjoying not only price parity with spot ether but also cheaper maintenance fees in any of eight competing spot ether ETFs.

New spot ether ETF cash inflows of $107 million is less than 0.1% of Ethereum’s $412 billion market capitalization. Net flows on the first day of spot bitcoin ETF trading were also worth less than 0.1% of bitcoin’s market capitalization.

Read more: If SEC approves ether ETF, will it approve altcoin ETFs?

Buy the rumor, sell the news

The debut of spot ether ETFs also had no same-day impact on ether’s price, which traded unchanged on the 24-hour trading session. As with most well-known market events, investors positioned themselves for today’s spot ether ETF debut far in advance.

On May 20, the price of ether rallied in the first major ETF news event. On that date, the SEC made surprisingly positive requests of spot ether ETF sponsors, indicating that commissioners were unlikely — as had previously been speculated — to flatly deny all ETF applications.

Due to that news, the price of ETH/BTC rallied from 0.046 to 0.055 just 24 hours later — a 20% outperformance of ether relative to bitcoin within one day.

Read more: All of Michael Saylor’s Ethereum predictions were wrong

In the weeks since that major move, ETH/BTC has traded around that post-rally range, indicating that most investors had already bid for ether weeks ago in anticipation of yesterday’s ETF debut.

In summary, ether outperformed bitcoin in its first day of spot ETF trading. Ethereum enjoyed $107 million of net inflows across all nine spot ether ETFs. Blackrock’s $266.5 million in net subscriptions led the pack in absorbing outflows from Grayscale. The second-best ETF by net inflows, Bitwise, subscribed $204 million.

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On June 27, purported market-maker GSR published a hyper-bullish report on Solana (SOL), claiming that its price could increase by over 900%. Its analysts’ incredible logic was based on the fact that the price of bitcoin increased 130% because of its spot ETF approval.

Asserting that supposed fact, GSR analysts then extrapolated the impact of what is in their mind a very likely approval of a Solana spot ETF.  Indeed, they state it as a foregone conclusion, claiming, “Solana is next, should additional spot digital asset ETFs be permitted in the US.”

Crypto influencers breathlessly retweeted and reblogged GSR’s presumptuous report hundreds of times and since June 27, the price of SOL is up about 5%.

According to GSR, “when” the SEC approves spot Solana ETFs, the only question is not whether the price of SOL will increase — but by how much. GSR calculated three, acclamatory price targets.

• Bearish: +140%
• Baseline: +440%
• Blue sky: +990%

GSR’s bullish sentiment seems to be shared by many pop researchers in crypto, such as RealVision, Delphi Digital, CoinStash, and Galaxy. On June 28, RealVision’s co-founder Raoul Pal personally claimed that 90% of his liquid net worth was in SOL. Delphi predicted an ‘Endless Solana Summer’ throughout 2024, predicting more for Solana than any other major blockchain. Even Mike Novogratz’s Galaxy is Solana’s top validator.

That is all quite fascinating, as the SEC has clearly designated SOL an unregistered security. 

SEC says SOL is an unregistered security

In paragraph 370 of a public SEC court filing, commissioners state that Solana Labs’ public dissemination of information since Solana’s initial coin (ICO) offering has led investors to reasonably view ‘SOL as an investment in and expect to profit from Solana Labs’ efforts to grow the Solana protocol, which, in turn, would increase the demand for and value of SOL.’

To be clear, paragraph 362 states that in the opinion of the SEC, SOL “was offered and sold as an investment contract and, therefore, was and is a security.”

That present tense ‘is a security’ is current at least as of June 5, 2023, when the SEC filed its lawsuit. It has no expiration and applies since the ICO of SOL.

Apparently, that SOL is illegal to broker or deal on US secondary markets for public investment is no matter for pop researchers like GSR, Delphi, CoinStash, and RealVision. Nor is it much consideration for hopeful ETF sponsors like 21Shares and VanEck — both of which have published equally bullish research on Solana alongside spot ETF filings.

According to VanEck, “We believe SOL is a commodity.” According to another uninformed lawyer, “There’s nothing preventing the SEC from approving a spot crypto ETF.” Needless to say, people believe many things that are not true.

According to 21 Shares, “We can view the gross market value of Ethereum as the benchmark for the potential value that Solana could capture in the long term.”

GSR goes to great lengths on its website to clarify that it’s not a broker or dealer. It’s a licensed money transmitter in two US territories — Puerto Rico and Washington DC — and five states, namely Delaware, Connecticut, Florida, Maryland, and Oregon.

That’s another way of saying it doesn’t have a money transmitter license in 45 states. Nor is it authorized or regulated by the UK Financial Conduct Authority.

No federally regulated Solana futures

Currently, there are two crypto assets that the SEC permits to wrap in spot ETFs: bitcoin and ether. Spot bitcoin ETFs already trade on US stock exchanges. Spot ether ETFs have most of their major approvals already, and will likely begin trading on US exchanges sometime this summer. Both assets trade under federally regulated futures markets.

However, SOL doesn’t trade under federally regulated futures markets. This could cause delays for a Solana spot ETF because it lacks futures.

Worse, Solana could also face delays due to its SEC designation as an unregistered security. Neither bitcoin nor ether faced this obstacle.

For context, the SEC was famously reluctant to approve a spot ether ETF for years. According to ConsenSys on the basis of a wholly redacted document in its’ possession, a majority of SEC commissioners allegedly believe ether is a security. However, the SEC has never officially declared this to be the case.

Read more: Solana pre-sale meme coin founders abandon their crashing projects

That commissioners had never classified bitcoin nor ether as an unregistered security certainly made it easier to approve their spot ETFs. Solana will not enjoy this privilege.

After a few years of delays, the powerful US Court of Appeals for the District of Columbia Circuit forced the SEC to either approve the spot ether ETFs or explain its rejection in a non-arbitrary and capricious manner. This court ruling forced the SEC’s hand because of uncontested evidence that there’s a 99.9% correlation between spot and CME futures market prices. Ultimately, the SEC relented and approved spot ether ETFs.

GSR waves away Solana’s headwinds

Because ether trades in a federally regulated futures markets with 99.9% correlation to its spot price, the SEC couldn’t claim that manipulation or lack of information-sharing agreements justified its rejection of spot ETFs. That was arbitrary and capricious grounds for rejection, according to the US Court of Appeals for the District of Columbia Circuit.

However, the SEC would easily be able to make those grounds for rejecting Solana spot ETFs. Because SOL has no federally regulated futures market it would not be arbitrary nor capricious to reject spot Solana ETF applications for traditional reasons like spot market price manipulation or lack of information-sharing agreements.

Of course, no one besides the five commissioners knows whether spot Solana ETFs are due for approval anytime soon. Ultimately, they have the discretion to approve or deny applications from entities like 21Shares and VanEck. In any case, they probably won’t be basing their decision on GSR’s research.

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The post GSR brazenly pumps Solana alongside VanEck and 21Shares appeared first on Protos.

A licensed attorney in Florida posted a viral tweet claiming that Coinbase’s rehypothecation was to blame for bitcoin failing to rally. Sasha Hodder of Florida Coastal School of Law — a school known less for its quality and more for closing entirely — claimed that CEO Brian Armstrong was to blame for bitcoin’s sideways (‘crabbish’) price action since spot bitcoin ETFs listed on US exchanges.

According to her theory, which gained over 780,000 impressions as of publication time, “Coinbase is somehow rehypothicating [sic] its prime lending customers’ bitcoin to fund bitcoin ETFs.”

Apparently, passing the Florida bar does not guarantee that an attorney knows how to spell rehypothecating — nor does it guarantee they know how capital markets work.

Read more: ECB bitcoin report triggers Crypto Twitter, catches community note

The post quickly gained a Community Note, a feature of Elon Musk’s social media platform X. According to this verified user’s note, upvoted by enough readers to persist underneath Hodder’s post, “There is no actual evidence that Coinbase is doing this and a later post from the author clarifies this is just pure speculation.”

Bitcoiners hate rehypothecation

Bitcoiners have a natural aversion to asset rehypothecation because it is a founding motivation for the creation of Bitcoin. Banks, including central banks, constantly rehypothecate their capital in order to collateralize loans and satisfy the low capital buffer needed for fractional reserve banking.

Rehypothecation is the practice of leveraging customers’ assets for new trades. Once a customer deposits $100 into a money market account, for example, most of that cash is rehypothecated to trade bonds, for example. This is common practice around the world. 

Rehypothecation allows banks to create money via fractionally reserved loans. Inflation requires rehypothecation.

At its best, rehypothecation allows multiple parties to earn a positive return on the same asset. At its worst, rehypothecation liquidates the assets of a nonconsensual customer. As an example of illegal rehypothecation, Sam Bankman-Fried lost hundreds of millions of dollars of FTX customers’ illegally rehypothecated money by trading MobileCoin without their authorization.

That decision — plus many other criminal decisions — landed him a 25-year prison sentence.

Bitcoin rehypothecation is bad for price multiplier

Rehypothecation also has another drawback for Bitcoiners: it reduces the price multiplier on which marginal purchases boost bitcoin’s price. 

Put simply, there’s only a small fraction of bitcoin’s circulating supply available for purchase on spot exchanges. Each $1 of buying, therefore, has more than $1 of price impact on the price of all (on- and off-exchange) bitcoin. 

Investors calculate the price multiplier effect parabolically, with a low multiplier for small quantities that rises parabolically as the quantity rises toward the available supply of spot bitcoin on exchanges.

Spot ETFs were also supposed to contribute to bitcoin’s price multiplier effect by allowing traditional investors and passive investment funds to reduce the supply of bitcoin off spot exchanges like Coinbase.

However, if exchanges like Coinbase somehow rehypothecated their customers’ bitcoin, including the bitcoin backing ETFs, then each marginal $1 purchase would no longer remove $1 worth of spot bitcoin from the exchange — destroying the price multiplier effect. 

For this reason, Bitcoiners refer to rehypothecated bitcoin as a form of ‘paper bitcoin’ — a claim on bitcoin but not the asset itself.

Theory without evidence

In summary, despite how antithetical rehypothecation would be for Bitcoiners’ desire to abandon traditional finance practices like fractional reserve banking — not to mention rehypothecation’s anti-multiplying price effect — there is no evidence that Coinbase is actually rehypothecating the bitcoin it holds on behalf of spot ETFs. 

Read more: Bitcoin ETFs have first net outflows in weeks

In the end, some market observers wonder why the spot Bitcoin ETFs haven’t caused the price of bitcoin to rise. The answer is more complicated than an invented theory that Coinbase is rehypothecating the bitcoin in spot ETFs. Bitcoin trades in a globally distributed network of thousands of exchanges operating around the clock. 

The actions of millions of market participants engaging in trades and price discovery are far too complex to reduce to a single allegation against Coinbase. The spot bitcoin ETFs are contributing to bitcoin’s price alongside myriad other factors.

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With the likelihood of the Securities and Exchange Commission (SEC) approving a spot ether ETF suddenly rising, altcoin investors are speculating on a possible flurry of approvals for additional coins.

Indeed, just this morning, WisdomTree gained approval from the UK Financial Conduct Authority to list its 100% physically backed Ethereum ETP on the London Stock Exchange as early as May 28 — although the products will not be available for retail investment.

The bullish momentum for ether, which is up 29% this week alone, might spill over into other crypto assets.

On Monday, Bloomberg ETF analysts James Seyffart and Eric Balchunas declared that the likelihood of the SEC approving a spot ether ETF had jumped from 25% to 75% thanks to the agency’s reported commentary to at least one exchange and one ETF applicant regarding their 19b-4 exchange rule change request.

The Wall Street Journal confirmed the news while CoinDesk also cited three people familiar with the matter. Around the same time and without citing 19b-4 news, David Han at Coinbase Institutional wrote a note adjusting his outlook for a spot ether ETF upward.

Barrons claimed staff workers at the SEC told exchanges “that it is leaning toward approving them, according to people familiar with the matter.”

As early as tomorrow, the SEC could approve a so-called 19b-4 filing that, alongside a related S-1 filing the deadline of which is weeks away, might lead to an eventual listing of a spot ether ETF by investment manager VanEck.

Other ETF sponsors have also filed 19b-4 applications with the SEC for a spot ether ETF, including Fidelity, 21Shares, Invesco/Galaxy, and Franklin Templeton. VanEck requested the earliest response date: tomorrow.

Will a spot ether ETF lead to other altcoin ETFs?

Certainly, ether is just one of many altcoins trading on US stock exchanges via trusts. There are over a dozen trusts publicly trading in the US holding alternate crypto assets: Litecoin (LTC), Chainlink (LINK), Basic Attention Token (BAT), Bitcoin Cash (BCH), Decentraland (MANA), Ethereum Classic (ETC), Filecoin (FIL), Polkadot (DOT), Horizon (ZEN), Stellar Lumens (XLM), Livepeer (LPT), Zcash (ZEC), and Solana (SOL).

So, if the SEC approves a spot ether ETF, could it also approve ETFs for additional altcoins?

The logic of altcoin proponents — arguing that non-ether spot altcoin ETFs might gain SEC approval shortly after a spot ether ETF — usually follows a simple argument: If the SEC permitted Grayscale to convert its bitcoin trust into an ETF, why would commissioners deny trust sponsors of other crypto assets to convert into an ETF?

For obvious reasons, that argument might fail if the SEC claims the crypto asset is an unregistered security. However, the SEC hasn’t classified all crypto assets held in US public trusts as securities.

Interestingly, many crypto trusts trading on OTC Markets, a US stock exchange, hold expressly SEC-designated unregistered securities, including SOL, MANA, and FIL. More crypto assets are rumored to be SEC-designated unregistered securities: ZEN, XLM, and ZEN. 

Nevertheless, there are certain trusts trading on US OTC Markets that don’t hold SEC-designated unregistered securities, such as DOT or ETC trusts. Perhaps, if the SEC were to approve a spot ether ETF, commissioners might approve spot ETFs based on such possibly non-security crypto assets.

It’s worth noting that just because the SEC hasn’t classified a crypto asset as an unregistered security doesn’t mean that it’s not. Congress didn’t task the SEC to proactively classify all assets. Instead, the SEC simply chooses to accept or reject applications that it receives, or file enforcement actions against illegal conduct on a case-by-case basis, as it has the time, money, staff, and resources.

Silence from commissioners doesn’t indicate non-designation.

Of course, there is a counterargument against this logic. Unlike altcoins like DOT or ETC, only bitcoin and ether have futures contracts listed on the Chicago Mercantile Exchange (CME). This CME market of significant size for ether alone might be a carrying reason for approving only a spot ether ETF and not any other altcoin.

Spot ether ETF: No longer an obvious SEC rejection?

According to reports from Bloomberg, Barron’s, and Wall Street Journal sources, the Trading and Markets Division at the SEC has requested amendments to an exchange and sponsor’s joint 19b-4 form — likely VanEck. This is a bullish sign for a possible spot ether ETF approval because, in the view of market observers, the SEC is typically silent or disinterested in 19b-4 filings if it intends to reject them.

Because the SEC is asking for a reapplication, the reasoning goes, its interest is likely a positive development.

Many viewed the SEC’s stance toward a spot ether ETF as decidedly negative. Joe Lubin’s ConsenSys even sued the SEC claiming that commissioners had secretly categorized ether as an unregistered security.

Therefore, if the SEC is actually considering a possible approval of a spot ETF for Ethereum, it would be a marked change of tone.

Read more: ConsenSys says the SEC designated ETH a security but won’t say where

Amid all of these media reports, the price of ether has rallied by 29% over the past seven days — outperforming bitcoin’s 12% rally by an additional 17%.

Form 19b-4 asks applicants for the information necessary for the public to understand why the SEC should change its Section 19(b)(1) rules pursuant to the Securities Exchange Act of 1934. In this case, the exchange and an ETF sponsor must explain why the SEC should allow ether to be used as the sole asset of a spot ETF.

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The post If SEC approves ether ETF, will it approve altcoin ETFs? appeared first on Protos.

Ten31 managing partner Matt Odell claimed this week that he’d figured out Michael Saylor’s true beliefs about Bitcoin development, specifically that, if asked, “He would encourage you to not support open source developers,” that he has “actively killed deals to support developers,” and that “he is proud of it.”

Odell’s opinion, which he shared on Nostr, is notable because he’s a fundraiser and board member at OpenSats, one of the largest donors to open-source Bitcoin development.

Odell continued to rant against Saylor. “One of the big ETFs was going to donate to open-source developers. Saylor told them if they did it, he would crush them, so they pulled out of the commitment.”

The conversation between Michael Saylor and ARK 

Jack Dorsey and Samson Mow later clarified that Odell’s unnamed ETF sponsor was Cathie Woods’ ARK Invest, specifically regarding its 21Shares spot bitcoin ETF.

Odell presumed that Saylor’s 214,246 bitcoin treasury at MicroStrategy, which could be used to develop or capitalize competing ETFs, provided credibility to his alleged threat to “crush them.”

The insinuation was obvious to Odell’s Bitcoiner audience on Nostr: that Saylor wants Bitcoin to ossify and doesn’t want active development on risky software upgrades that threaten Saylor’s thesis of bitcoin as digital gold. The narrative fits the anti-statist ethos of Bitcoin which has rebelled against corporate capture for years.

Odell and many Bitcoiners fear that Saylor, the billionaire CEO of a NASDAQ-listed bitcoin holding company, will use his wealth to stymie innovation and development whenever it threatens bitcoin’s identity as digital gold.

Read more: Cathie Wood’s ARK joined the Bitcoin ETF race — but does it matter?

According to Samson Mow, however, Odell mischaracterized what actually transpired. In reality, he said, Saylor simply expressed his opinions about funding open-source development in relation to the bitcoin ETF, not about funding Bitcoin developers generally.

Mow also didn’t view Saylor’s tone as in any way a threat to ‘crush’ competing donors. Neither did Saylor encourage corporate or statist capture of Bitcoin development during that conversation, according to Mow. In the end, the interaction had little to do with Saylor’s support of Bitcoin development whatsoever.

Mow concluded, “If ARK Invest decided to fund or not fund development based on Saylor’s opinion, that really has nothing to do with Saylor and everything to do with ARK. Saylor can’t really stop them from doing anything. Let’s move onto the next drama.”

In the end, it seems that despite the knee-jerk overreaction of many Bitcoiners, Michael Saylor never offered to pay Bitcoin developers to stop working. He had a private conversation with a group of people at ARK Invest and elsewhere, and then Odell became upset. Saylor hasn’t commented on the misunderstanding on X or Nostr.

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