The News Block #21 (01/24/2024)
ETFs Stack 100,000+ Bitcoin, FTX Estate Sells $1 Billion in GBTC, Trump Says No to CBDCs, Jamie Dimon Calls Bitcoin a “Pet Rock,” Milei Urges Davos to Embrace Freedom & Free Market Capitalism
Listen to the latest episode of the News Block below. 👇
GBTC Raining on the ETF Parade:
Bitcoin’s price is down around 20% in the aftermath of the spot Bitcoin ETF approvals, from a recent high of $49,000 to below $40,000 for the first time this year.
If you’re a long-term investor, you’re likely welcoming this opportunity to pick up some sats on sale, but it’s safe to say this move took a lot of people by surprise.
But despite the price action, the ETFs have had wildly successful launches by almost any measure. In their first seven days of trading, the ETFs combined for almost $20 billion in trading volume!
Below is a table from Bloomberg Intelligence Senior Analyst Eric Balchunas that shows the updated ETF leaderboard in terms of inflows after a week of trading, with BlackRock on top, followed by Fidelity, Bitwise, and Ark/21 Shares.
But any potential price boost from these ETFs is currently being offset by funds flowing out of Grayscale’s converted ETF, GBTC. GBTC has seen a massive $3.4 billion in outflows in its first week of trading, which resulted in the company having to sell a lot of bitcoin.
Plenty of market participants predicted Grayscale would see large outflows due to its high fee compared to other cheaper alternatives. They charge 1.5%, while most other ETF issuers charge less than 0.50%.
But as it turns out, there was another big GBTC seller that many people overlooked: the FTX bankruptcy estate.
According to a report from Coindesk, the FTX bankruptcy estate has sold around 22 million shares of GBTC, or about $1 billion worth, since GBTC was converted into an ETF.
The estate will now use the proceeds from the sale to distribute the funds to FTX customers who are waiting to recoup their money after the exchange’s collapse. The FTX bankruptcy estate now holds zero GBTC shares.
It’s actually reassuring that the FTX estate accounted for more than one-third of the GBTC outflows, given that this can only happen once. The FTX estate has now sold its entire GBTC position, and that selling pressure on Bitcoin is now in the rearview mirror.
And if we zoom out, continued inflows for the other nine ETFs will likely create substantial buying pressure, especially in the coming months. It’s only been one week, and the top five ETF issuers combined already hold more than 100,000 BTC!
With only 2.3 million Bitcoin available on exchanges, it’s not hard to imagine what happens if a new wave of sustained demand meets a scarce asset with a fixed supply.
GBTC may have put a temporary damper on the 2024 bull run, but these ETFs are now set in place to potentially bring billions into Bitcoin for years to come.
Tether Is Stacking Thousands of Bitcoin:
The ETFs are not the only major Bitcoin buyer in town - there’s also Tether, the massive stablecoin issuer with a $95 billion market cap.
Today, Tether is making around $1 billion in profits every quarter. Its profits have ballooned mainly because of the Federal Reserve hiking interest rates above five percent.
Tether owns around $72 billion in US government bonds as part of its reserves. With today’s higher rates, Tether collects hundreds of millions of dollars in interest each quarter on its massive Treasury holdings. In other words, the Fed has been pumping Tether’s profits to the moon.
With today's higher rates, Tether collects hundreds of millions of dollars in interest each quarter on its massive Treasury holdings
And what has Tether been doing with all of the profits? Buying Bitcoin.
Back in May, Tether announced that it would start using 15% of its profits to purchase Bitcoin as part of a new, ongoing reserve strategy.
This means that Tether has become one of the world’s largest consistent buyers of Bitcoin. Every quarter, like clockwork, Tether rolls its profits from the interest earned on its reserves into Bitcoin.
This past week, Tether bought 8,888 BTC for $380 million with its profits and now holds more than 66,000 Bitcoin, making Tether one of the largest holders of Bitcoin in the world.
This may concern some readers, given the controversy around Tether. Tether’s complicated history has long raised questions about whether its stablecoin is fully backed or not, especially since it has never submitted its reserves to an independent, third-party audit.
But for some, those concerns may have been alleviated this past week when Cantor Fitzgerald CEO Howard Lutnick had this to say on BloombergTV.👇
The CEO of a large financial firm like Cantor Fitzgerald definitively saying that Tether has the money surely gives more credibility to the idea that Tether is an honest operation, but I’m sure many people still won’t be fully reassured until they finally see a real audit.
Trump Says No To Central Bank Digital Currencies:
That interview with Howard Lutnick came from Davos, Switzerland, where the highly-exclusive World Economic Forum Annual Meeting took place.
The meeting includes finance ministers and central bankers, many of whom have been promoting the benefits of central bank digital currencies, or CBDCs.
In many ways, CBDCs represent an expected progression and expansion of fiat technology to an even more centralized, digital monetary system in which a small group of people in power can manipulate the money and censor and surveil the populace.
More and more people are starting to see CBDCs for the risks they carry - to be used as a potential tool of oppression and an infringement on individual freedoms. I, for one, hope to hear more presidential candidates addressing CBDCs. We actually saw that this week when former President Trump gave credit to former presidential candidate Vivek Ramaswamy for alerting him of the dangers of a CBDC.
Here’s what Trump said during a New Hampshire primary event.👇
CBDCs represent a new form of digital money that would be forced onto the population from the top down, which stands in stark contrast to Bitcoin, which has been chosen in the open market from the bottom up. At the WEF gathering in Davos, we got to hear some of what the elites think about Bitcoin…
Jamie Dimon Calls Bitcoin a “Pet Rock:”
One interview from Davos that made waves was when JPMorgan Chase CEO Jamie Dimon called Bitcoin a “Pet Rock” and demanded CNBC never ask him about it again.
Check out what he had to say:
First off, it must be noted that it’s factually and verifiability wrong to say that the primary use case for Bitcoin is to facilitate illicit activity. According to Chainalysis’s 2024 Crypto Crime Report, the share of total cryptocurrency transaction volumes that were confirmed as illicit was just 0.34%.
Senator Cynthia Lummis responded to similar claims from Senator Elizabeth Warren when she tweeted this:
Maybe one day, Bitcoin skeptics like Warren and Dimon will stick to the facts. Until then, Bitcoin really deserves better critics.
Milei Urges Davos to Reject Socialism:
But Dimon didn’t supply the most viral moment from Davos, which arguably belonged to Argentinian President Javier Milei when he gave a special address warning that the Western world faces a significant threat of socialism.
Milei opened with, “The main leaders of the Western world have abandoned the model of freedom for a different version of what we call collectivism. We’re here to tell you that collectivist experiments are never the solution to the problems that afflict the citizens of the world - rather, they are the root cause.”
Milei then urged the Davos elite to embrace free market capitalism to end hunger, poverty, and destitution around the planet.
The overarching theme in Davos this year was “rebuilding trust.” One big way these leaders could rebuild public trust would be to adopt a form of money that removes the need for trust entirely.
Bitcoin strongly aligns with the principles of free market capitalism. At its core, free market capitalism is characterized by minimal government intervention, with prices and production set by free actors responding to open market forces rather than central planning. Bitcoin exemplifies this by operating in a decentralized manner where no single entity or government has control. Thereby, it’s immune to manipulation and debasement.
I expect Bitcoin adoption only to accelerate as more people begin to understand it and choose to put their trust in Bitcoin’s code and free market principles rather than in corruptible humans who continue to lead us down a path towards socialism and poverty with their poor policy decisions.
Until next week, keep stacking.
- N₿
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Preston Pysh is the founder of investment company, the Pylon Holding Company, General Partner at investment fund Ego Death Capital, co-founder of The Investors Podcast Network, host of Bitcoin Fundamentals, and founder of BuffettsBooks.com. He is globally ranked on Amazon as a top 100 business author, and writes about international finance and central banking as a contributor on Forbes. He is the founder of the Pylon Holding Company and a graduate of West Point and Johns Hopkins University.
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