Early postponement for US bitcoin spot ETFs

Peter Slagter Schrijver, spreker en analist Bitcoin Alpha, Descryptor en Satoshi Radio

27 September 2023

Something extraordinary happened in the US on Tuesday. Shortly after four members of Congress urged the SEC to approve the ETFs applied for, the regulator announced earlier than expected that it was shelving ARK Invest's application. How so? You can read that, and more, in this Weekly.


"Yellen has a very good feeling about a soft landing of the US economy," is how Bloomberg summarises the US Treasury Secretary's statements. "We are on the route to a soft landing, the inflation numbers bring us one step closer each time." Yellen made this statement a few days before Jerome Powell sat down in front of the camera to explain the interest rate decision.

Last Wednesday, the US central bank decided to keep interest rates unchanged. Fed Chairman Powell's story was also more or less the same as earlier this year. Short summary: We have now raised interest rates to a level where the economy is slowing down. We will keep interest rates high until inflation falls to the 2 per cent target. 

That may take quite a while, so count on interest rates remaining roughly at this level for a long time. So far, nothing new. Still, a shiver went through the market, and it came from the attached Summary of Economic Projections (SEP). That describes how the Fed's 19 directors expect the economy and monetary policy to evolve in the coming years.

It showed that they expect the economy to continue growing, unemployment not to rise much, and inflation to fall neatly to 2% by 2026. In other words, inflation will be curbed without the economy going into recession. And that is the definition of a soft landing.

They do this by keeping interest rates high for a long time. The SEP shows that executives expect interest rates to remain above 5% at least through 2024, and not fall a bit until 2025 at the earliest. This expectation of "higher for longer" sent US bond yields soaring, as did the dollar exchange rate.

A journalist asked Jerome Powell the logical question of whether the soft landing is now his base case scenario. He replied in the negative: the soft landing is "a plausible outcome" and "our primary goal", but it is certainly not the base case. There is too much uncertainty for that.

The question now occupying financial markets is whether the US economy is strong enough to bear these high-interest rates for so long. That is by no means guaranteed. Data from Bloomberg show that in previous major crises, too, there was extensive talk of a soft landing first each time!

US02 Y 2023 09 27 12 14 19

Increased interest rates have made money in a savings account, money market fund, or bond ETF more attractive. In the US, real interest rates are now positive, meaning they are higher than inflation. This makes saving a sensible alternative to investing again. The days of TINA - there is no alternative - are (briefly) over. And that is a headwind for all other asset classes.

It is striking how well bitcoin and most other crypto assets have held up in recent weeks. Despite rising interest rates, and the strengthening dollar, bitcoin's price has been steady between $25,000 and $27,000 for almost six weeks.

Ether, the currency of the Ethereum network, is slowly giving up some ground to bitcoin. On 15 September 2022, 'the merge', the major upgrade of the Ethereum network to proof-of-stake, took place. Some had expected ethereum to structurally outperform bitcoin after that, but that did not happen.

Since the beginning of this year, ether lost 19% against bitcoin. For 1 ether, you still got 0.073 bitcoin on 1 January. Meanwhile, that has fallen to 0.059 bitcoin. That is the lowest since July 2022 and the same as October 2021, when bitcoin was above 50,000.

ETHUSD 2023 09 27 14 39 06

News summary

On Tuesday evening, around 10 o'clock (Dutch time), a striking letter was published to the address of the regulator SEC. The sender is a group of four Democratic and Republican politicians. With the first sentence, the foursome set the tone: "We are writing to ensure that the SEC does not continue to discriminate against spot bitcoin ETF products."

Eric balchunas twitter

The rest of the letter is an argument for the approval of the coveted ETFs. In doing so, the group refers to the lawsuit between the regulator and Grayscale, in which the court unanimously sided with the bitcoin sector. The SEC has no choice but to approve the applications, which is the idea, and should not wait unnecessarily long to do so.

Never before has a call been answered so quickly. Half an hour after the letter was published, word appeared from the regulator. The latter prematurely chose to postpone the decision on ARK Invest and Global X's applications. Remarkable, as the decision period did not expire until 7 October.

James Seyffart twitter

The chances are minimal that the SEC responded to the letter from Congressmen. The two events intersected, leading to the question of why the SEC chose to delay prematurely, and more importantly, why it chose to do so now.

Rather quickly, speculation started about the signal the SEC was sending with about the arrival of the spot ETF. Is the regulator still on the track of disapproval? It is possible, but in this case, we think the cause is more straightforward: the US government shutdown is hanging over the market and the regulator is preparing for it. On 1 October, the US starts the new fiscal year, but its funding is not yet in place. If it stays that way, much of the government will be put on hold, including the regulator.

The outcome of the court case between Grayscale and the SEC will continue to guide the chances of the ETF applications being approved. If no surprises emerge in that, this early delay is a non-event for Bloomberg ETF analysts: "our probability estimate is not drastically affected by this".

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Other news:

Billionaire Tim Draper starts crypto business incubator despite 'American shitshow'. The so-called accelerator is focused on DeFi innovations around scalability and consumer applications. Draper has two co-founders, Alon Goren and David Bleznak. "We plan to work with companies over the next 10 years," Draper said. To launch those companies, the trio is offering between $25,000 and $100,000 in seed capital.

The Institute of Risk Management (IRM) calls bitcoin the "key to sustainability". The institute describes seven functions that bitcoin can hold via miners, including in managing the power grid, preventing emissions, and accelerating the adoption of wind and solar power. "Mining could already prevent 8 per cent of global greenhouse gas emissions by 2030, simply by putting unused methane to work," the institute writes.

Guatemala uses bitcoin to secure national elections. El Salvador's neighbor has hired a company to create "immutable backups" of election results. That uses OpenTimestamps to record evidence on bitcoins blockchain. In this way, bitcoins decentralised and immutable nature is employed to combat corruption, without being put into use as a means of payment or currency.


Satoshi Radio is the largest Dutch podcast that passes along the ins and outs of everything happening in the crypto world. The latest episode, for instance, covers Nic Carter's Orb, a much-discussed keynote by Eric Voorhees, and emails from Sam Bankman- Fried's father (FTX). But what we want to focus on now is Bert Slagter's talk on the plans around the reform of the Dutch wealth tax. What impact will this have on bitcoin investors? You can hear the answer, and more, here!

Behind the scenes

Last week, Amdax ceo Lucas Wensing delivered the lecture 'Investing in Bitcoin' at the DNC Business Network in Mougins, France. Here, Lucas provided valuable insights on bitcoin's place in a modern investment portfolio. We look back on a successful and inspiring trip!

On behalf of your business club, are you also interested in a lecture on investing in bitcoin and other crypto assets? Then get in touch at accountteam@amdax.com or +31882632900.

Lucas Frankrijk
Peter Slagter Schrijver, spreker en analist Bitcoin Alpha, Descryptor en Satoshi Radio

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