All roads seem to be leading to a U.S. spot bitcoin ETF approval | Chain Reaction Podcast

Hey everyone it's jacyn melanic welcome To chain reaction a show that unpacks And Dives deep into the latest trends Drama and news with some of the biggest Names in crypto breaking things down Block by block for the crypto Curious for this week for chain Reactions News segment we're diving back Into spot Bitcoin ETFs and what could be Coming down the pipeline as the Attention builds up after a number of Reporters and ETF analysts are hearing Indications for approvals as it stands There's 14 Asset Management firms Including Black Rock Fidelity grayscale And others hoping to win their own Applications approval from the US Securities and Exchange Commission for Their spot Bitcoin ETF applications and Some reports are now saying it might Happen soon given the frequent meetings And updated filings in the recent weeks Since this moment has been a long time Coming as over the last decade the SEC Has rejected a number of applications For Bitcoin spot ETFs and to date the Only crypto ETFs that exist are tied to Futures contracts for Bitcoin and Ethereum not the spot Market itself at The time of recording on Wednesday January 3rd there is still no decision But many are hoping one comes soon Joining me today to sparse through all Of this is Fred teal the CEO of marathon

Digital Holdings a digital asset tech Company that is home to the largest Publicly traded Bitcoin mining firm Thanks for coming on Fred thanks it's Great to be here yeah so I spoke about It a bit in the intro but based on the Quick recap of what's been going on with The spot ETF approval so far or imp ones What elements do you think hold the most Significance for these applications Today you know as you look at these Applications the back and forth with the SEC seems to have been on a lot of Technical details which leads me to Believe that it's not a principle-based Decision that's going to be made if Anything there will be decisions based On technical Readiness of each Particular applicant I think also the SEC is maybe should be let's put it that Way concerned regarding if they allow One or two to be approved and delay a Number of other ones that are Essentially giving a first mover Advantage to a couple of funds so it's Going to be a interesting set of Decisions supposedly the SEC had set a Deadline of end of last year for Applicants to submit certain details of Cash settlement Etc so that they could Inform the applicants by the 5ifth or 6th and the window is the 5ifth through The 10th realistically the public will Find out about it sometime around the

8th I think mhm but even Kathy Wood has Supposedly said that it's not unlikely That some of the applicants are delayed Interestingly she didn't say denied she Said delayed how do you kind of see the Application approval timeline playing Out if that January 10th deadline is Correct so essentially what that gives The applicants the ability to do is go Live meaning they can start marketing And promoting they put in place the Final little things they need to be able To actually execute trades and take in Money Etc I may be wrong but my Understanding is 45 to 60 days post Approval they're actually live and Receiving purchases from interested Buyers and why do you think this Timeline has been moved up so much is it Based off the things that you said Before or is it a matter of other Aspects that maybe haven't been brought Up to the public if by moved up you mean Cuz in reality you know these Applications have been delayed delayed Delayed in reality there's there's no Answer yet but I'm saying if it out on This January 10th deadline why do you Think it has been moved up because I Remember even a couple months ago or Even last month people were like yeah It's going to happen it's a matter of When not if and it's going to happen in 2024 and now everyone's saying hey it's

Happening right now in the beginning of January is the Hope well technically Speaking there were a couple of Applications and I think AR included Which have hard yes no dates of Jan 10th Because they've already been delayed and So the SEC can delay they have I'm not 100% sure on the technical details of How this all works but essentially the SEC is allowed to delay and then you Come to a point where they have to Flatly deny or approve right and they're At that deadline with I think three to Five funds so that's what's really Driving this January you know 8th to 10th deadline and to play Devil's Advocate I'm sure you saw the reports This morning on Wednesday that a Rejection Could Happen Matrix Port Analysts apparently thinks that it won't Go through and that's just one person And experts are saying the odds are low But it's not impossible what do you Think is the possibility of a Bitcoin Spot ETF application rejection actually Happening yeah there are 12 applications I think that are active it's not Unforeseeable that some may be flatly Denied because the funds just aren't Ready they haven't submitted enough Details they haven't gotten everything Done if you kind of read between the Lines on recent news kind of rumor Mills You've been hearing that fund XYZ has

Been talking with the SEC other funds And if you kind of try and parse it Together not all 12 seem to be in Dialogue with the SEC so that would lead Me to believe that some will be denied You know no commentary regarding Matrix Port but the Bitcoin Market is a very Thinly traded Market still majority of Bitcoin is held by wallets that haven't Moved Bitcoin in over a year you don't Have a whole lot of liquidity on Exchanges rumors Drive the market all Events like this are buy the rumor sell The news and it's an opportunity for Traders when you come out with a news Item that you know you think about how You described what they said that there Could be some denials the word could is Not very definitive and yeah it's There's a likelihood that one or two Maybe denied does that mean that ETFs Won't be successful the ones that are Approved no not at all but it's people Misreading the news there was a lot of Retail flurry into Bitcoin just around The end of the year you know prices were Going up everything was moving up retail Was coming back in starting to trade and I think what we're now seeing is retail Saying oh my gosh panicking a little bit I think institutional buyers are licking Their chops CU they're able to buy Bitcoin at 42 and 41 versus having to Pay 45 for it so you know right away

They're getting a benefit of this longer Term and even Matrix Port said this you Know they expect at the end of 2024 you Know Bitcoin to be way up there so yeah I think this is an opportunity to buy Personally my personal advice not Investment advice yeah of course but I Think it's an opportunity to buy know This show is a NFA not Financial advice We always tell people to do their own Research of course and on the topic of Approvals I agree with you I don't think All of them will be approved today next Week or even in a month it takes time For each application to get its own Response and there's a lot of Conversations out there that black rock Will be the first one to get it given The sheer size of It kind of their Relationship with the government and Other institutional entities I guess to Say I'm curious if you think that's the Case that black rock will kind of be This first mover in this space or do you See it as like maybe Black Rock and Others or others completely and not Black Rock I'm curious your thoughts There so you kind of have to go with Black rock because let's face it they Have 554 ETFs that have been approved and Only five denied so you got to imagine That they a know how to do it B have all The infrastructure in place to deal with

It and C have a great relationship with The people at the SEC so you know they Weren't going to go after this if they Didn't think there was a chance of this Being denied cuz you know Larry Frink Wouldn't want to have that black mark on Him I think Arc is the other one that'll Likely get approved right and then There's a Cascade down from that of Three or four you I would expect at Least five to get approved again the SEC They don't just want to approve black Rock that would open them up lawsuits I Think why is that well they're giving Black Rock a first mover advantage on The field right so with that all said I've talked about this on the show in The past with other guests but I'd love To hear your opinion too Fred what would A spot Bitcoin ETF mean for investors And institutions alike maybe looking to Get in the space some might already be In the space and what does it mean for Bitcoin so you have to think of Bitcoin As an Institutional asset there are Three ways basic ways to play Bitcoin Outside of the Futures and options Markets one is you buy and hold spot Bitcoin go to coinbase go to whoever and Buy and Hold spot Bitcoin the ETF now Provides an opportunity for retail Buyers who have trading accounts Brokerage Accounts at Charles Schwab Other places like that who would like to

Have some exposure to Bitcoin in their Whether it's 401ks IRAs or just in their Savings who don't want to go through the Risk and hassle of necessarily opening An account on a centralized exchange There's been so much news over the past Years of issues with exchanges and we Had all the problems due to FTX Etc that I think you know a lot of people have Especially of my generation the boomers Are definitely on the sidelines around Bitcoin because because it's just Difficult to you can't just invest in it Like stock so that's spot Bitcoin so I Think you have some people who are going To definitely take advantage of the ETF As a way to invest and hold Bitcoin Without having to worry about custody Without having to worry about all those Things and the fees are di Minimus so It's good institutions especially can be Limited from holding spot Bitcoin other Ways so it provides them with an ability If you then look at people who are more Active Traders you can look at micro Strategy as a way of holding Bitcoin Right it's an equity you can invest in It he trades on the market and you can Play on the beta generated by you know The fact that Michael sailor can load His balance sheet up with debt buy Bitcoin and then go and do it again Right or you can buy miners which is Kind of what we call the Warren Buffett

Approach which is you know why buy gold When you can buy the gold producers Because in up years the cost tends to be Fixed but the profits grow dramatically And if you look historically at Bitcoin Miners and how they trade relative to Spot bitcoin price there's definitely You more volatility in the minor so if Bitcoin moves 2% the miners move 4 to 6% In both directions both up and down MH So in an up Market you know people tend To push the miners up and that's why if You look at last year Bitcoin miners Were up almost 3x what Bitcoin was when You look at a percentual gain so those Are kind of the three ways to play it You know Traders are going to tend to Play the miners because they can get in And out of them they're highly liquid it Doesn't impact the price of Bitcoin at All and especially miners like ourselves Who hold a lot of Bitcoin were a great Proxy for Bitcoin so you've got those Three Alternatives the people who have Not been buying Bitcoin are going to go After the ETF because it's a safer bet So I think the ETF is an Institutional Play for family offices who don't want Direct Bitcoin exposure by holding it Themselves they prefer to do it through A custodian by an ETF and it's also Great for retirement plans and for you Know people who don't want to have to Deal and aren't interested in other

Crypto Bitcoin is the only thing they're Interested in so why bother with a Coinbase account so I think that's where You're going to see it but but Potentially that could be huge you look At gold ETFs and gold has the same Dynamic as Bitcoin right gold is a Commodity gold is produced gold price Moves up and down with various macro Factors and you can hold spot gold you Can buy gold Futures you can buy gold Miners you can do all those things when The gold ETFs launched they generated a Fairly large amount of demand and so I Think the market is anticipating Significant demand in Bitcoin ETFs which Will require those ETFs to acquire Bitcoin which in turn will Drive the Bitcoin price up again back to what I Said earlier about limited liquidity in The market around Bitcoin you know you Get $5 billion coming into a fund all of A sudden and that's a significant amount Of Bitcoin that has to get purchased and What's that going to do in the Marketplace of the uh 14 proposals that We've talked about a number of them had Filings last week where they talked About how their potential ETFs would Have a certain fee and I'm curious Fred If you think there is a sweet spot for The fees obviously some people might Like go towards the ones that are the Lowest fees so far Fidelity has shared

That there's is 0.39% others are between that level up To 0.80% for a fee so what does that really Mean in the grand scheme for these Investors obviously people want to keep It as low as possible because they want To retain as much value as they can but When it comes down to these tiny points Do you think it really makes a Difference given the amount of volume That people are putting in or when it Comes comes to people who are investing In long-term options like you said Before with like retirement accounts Will they just pick whatever is kind of Presented to them opposed to what's the Lowest basis points I mean for the Average consumer investing in you know Retail buyer investing in Bitcoin bya an ETF three so 30 basis points versus 80 Basis points is it really going to make A difference on their $510,000 investment no not really Institutional buyer who's putting $100 Million at play yeah it definitely makes A difference and it's also going to be a Brand name marketplace where a brand is Going to drive kind of attractiveness of Of offering you know Black Rock has a Reputation Fidelity has a reputation Arc Isn't as well known amongst retail Buyers they're more known amongst Institutions and so I think each ETF is

Going to cater a little bit to their Sweet spot in their Marketplace but I Think a fee structure somewhere between 25 basis points and 80 basis points Likely The Sweet Spot is going to be Somewhere around 40 basis points right That would make a lot of sense and kind Of dialing back before you talked about Bitcoin mining and given that your Company is a major Bitcoin mining firm What do you think an approval of a spot Bitcoin ETF could mean for Bitcoin Miners in the long term again more Demand for Bitcoin it's essentially a Demand shock which drives the price of Bitcoin up when the price of Bitcoin Goes up the value of public minor stocks Go up last year was a huge year for the Mining segment I mean we went from $3.50 A share all the way up to we peaked at Just about $310 a few days before New Year so That's you know nearly a 10x run right There so for the Bitcoin miners if Bitcoin price goes up it's very good in General same thing applies when bitcoin Price goes down by the way we move Faster down do you think there's a Reality though where if these spot Bitcoin ETFs are approved that the Market just doesn't have the same demand That people in a Bitcoin and crypto Think it would have that people aren't Rushing into buy it the way that we

Expect them to well I think there is a Huge amount of confirmation bias that Exists in any Market from insiders The Advocates the passionate followers the Maxis you know it's to the Moon right And U I know I'm going to get some hate Mail for saying that no you're good but You know if you talk to Ras who are Registered investment advisers and you Talk to Goldman and you talk to the Banks and even JP Morgan regardless of What Jamie Diamond says you know their Clients want an allocation to bitcoin They don't want an allocation to crypto They want an allocation to bitcoin and This is a safe way for them to do it and So I think what you're going to see was It Fidelity who said one of the advisers Said you know a 1 to 2% allocation to Bitcoin in a 60/40 portfolio split Between equity and bonds would give you A risk adjusted return that was Significantly higher than if you had Just had the stocks and bonds and so I Think you know that especially in an Environment where expectation is Interest rates are going to drop economy Is going to slow down Equity markets are Going to likely you know valuations of Publicly traded companies because of the Slowdown in the economy their profits Will decrease Etc I think what we'll see Is Bitcoin will be this Safe Haven fair Weather asset like it has shown to kind

Of be over the past few years and I Think it's going to be very good times For Bitcoin ETFs and for Bitcoin in General at the same time you've got Opportunities for potential greater Liquidity in the markets as fed starts Looking to cut rates and things like That so it's going to be a very Interesting year it's an election year Politicians are going to want the Economy to be doing well especially the Democrats so I think we're going to see A lot of things to try and win over Voters and you know potentially this Whole the shift in The Stance from the SEC is a bit of that there is quite a Large number 50 million people in the US Today I think that hold or have held Bitcoin and crypto mhm that's a pretty Large number of potential voters right For sure and so why alienate voters on a Single issue like that when you can say Fine okay we'll allow Bitcoin ETF we're Crypto-friendly to some extent oh and by The way we locked up S bankman freed and These other Guys yeah about that I think it's over Like 10 or 20% of the adult population Has uh crypto but yeah to wrap things up Fred I wanted to talk a little bit about Bitcoin pricing everyone talking about It Bitcoin is over $40,000 in the $ 42 To $45,000 range it hit its highest Level yesterday on January 2nd which was

The highest level since April 2022 do You think the current bitcoin price is Priced into the market based on Everything we know now and have talked About and if not what do you think will Drive the price in general whether That's up or down in 2024 oh gosh um Have to ask don't don't think we have Enough time for the full answer but I Think here's here's kind of the reader Digest version bitcoin price is very Driven by global liquidity and access to Investment Capital right it's an asset Just like old or other things and then You have the Nuance of is it a risk on Or a riskof environment if it's a Risk-on environment people historically Have invested in Bitcoin in a risk-off Environment they've shied away from it I Think that has now changed somewhat Because it's become more of a safe haven Asset especially over last year so the Longer term trend is only positive for Bit Bitcoin I think we're going to see The having occur which I don't think has A huge impact from a supply perspective On bitcoin you're going to go from Producing 900 new Bitcoin per day in the Market to 450 I don't think that small Delta in Supply is going to drive major Supply shock what I do think you're Going to see is demand shock you're Going to see the ETFs start needing to Buy Bitcoin you're going to start seeing

Companies looking at Bitcoin on the Balance sheet with the fby changes you Know this is a bit of a sleeper thing Not a lot of people realize the Importance of the fact that once a Company and fund Etc can hold Bitcoin on The balance sheet and Market to Market Now all of a sudden it becomes Attractive before it was an intangible Asset and you can only impair it and so You carried it on your balance sheet at Its lowest value right this is going to Cause companies to start using it as a Treasury asset the other thing you're Going to see because we have this myopic View of the US is everything right you Start shifting your view outside of the US there's more mining done outside the US than in the US there is more Bitcoin Trading done outside the the US than in The US I thought the US was at the top Or was that like year two ago no it's The largest single country but Russia is A number two Kazakhstan uh etc etc etc So you know the US is sub 45% of the Global blockchain okay so when you start Adding all that up and you start seeing A continued desire from sovereigns to D Dollarize and look at alternative Methods to hold their assets you know Let's face it if you're trading with China do you really want to keep all Your assets in in Juan or in miby most Probably not if you're trading with

India do you want to hold it in rupees Most probably not if you can't hold it In dollars where are you going to hold It and so gold you look at the central Banks all of the global central banks Have been huge buyers of gold over the Past 24 months why because of the Weaponization of the US dollar so throw It all into a pot cook it stir it and What it says is there should be more Global demand for Bitcoin over the next 2 to three years than not and so expect The price to continue to go up and with The ability of ETFs you've now removed Friction from the process of holding it And so you'll now start seeing people Begin to experiment and you know the Timing of these ETFs is perfect because In Bitcoin cycles and I'm not saying That the Cycles always repeat but we are In that phase of the cycle where you Know we should exceed the all-time high Sometime in 2024 then there'll be a bit Of a retracement and then you'll see a New all-time high sometime in third Quarter fourth quarter of 2025 all right Um that's if we follow traditional Patterns right so that's not based on Any empirical thing that's purely if we Follow patterns historically and I think A lot of people trade that way and a lot Of people focus that way I certainly Know when I talk to people they're all Saying yeah you know it's the same cycle

As last time yeah 2025 is going to be The Home Run year so I think you're Going to see a lot of people put their Toes in the water this year and then as The price of Bitcoin starts increasing You're going to see more and more people Come in it's this positive reinforcement That happens so we're certainly excited Yeah that's definitely exciting for the Bitcoin space and people watching it so There's lots to keep an eye on here and I'm excited to see how things shake out But with all that said Fred thank you For joining us on the show this week Thank you very Much we'll be back next week with Conversations around what's going on in The wild world of web 3 with top players In the crypto ecosystem you can keep up With us on Spotify Apple music or your Favorite pod platform And subscribe to Our companion newsletter also called Chain Reaction links to the newsletter And stories we talked about can be found In our show notes and be sure to follow Us at chain reaction on Twitter chain Reaction is hosted by myself jacn Melanic and produced by Maggie stamitz With assistance from Yad karney and Editing by Kell Bryce Durban is our Illustrator and Henry pette manages Tech Crunch audio products thanks for Listening in see you next [Music]

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