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A $1.5T Asset Manager Is Getting Into Bitcoin

As bitcoin hits $50,000 again, more news of institutional adoption and mainstreaming.

Listen on:

On this episode

This episode is sponsored by NYDIG.

Today on the Brief:

  • Binance dinged by Singapore authorities while discussing Binance.us going public
  • Former CFTC Chair Giancarlo leaves BlockFi board of directors after only four months
  • SEC takes action against … BitConnect?

Our main discussion: Franklin Templeton has posted a job listing for a crypto trader, while Vast bank now offers bitcoin buying and selling directly from FDIC banking. NLW explores what’s next in the bitcoin market cycle.

“The Breakdown” is written, produced by and features NLW, with editing by Adam Levine and additional production support by Eleanor Pahl. Adam B. Levine is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsor is “Tidal Wave” by BRASKO. Image credit: Malte Mueller/iStock/Getty Images Plus, modified by CoinDesk.

Transcript

What’s going on guys, it is Thursday, September 2, and today we are talking about a $1.5 trillion asset manager getting into Bitcoin and crypto, and also just an outlook on Bitcoin in general. But first, let’s start with the Brief. And the theme of the day is definitely institutionalization and integration. Let’s start the Brief with the latest in the saga of Binance. And first, the rough. The Monetary Authority of Singapore has issued an investor alert for Binance. This comes as a follow up to their statement in July that said that they were reviewing Binance’s Singapore entity, which at the time had a licensing application under review late last month. Binance also hired Richard Teng, who is the former CEO of Abu Dhabi’s financial watchdog, to run their Singapore efforts. So, clearly they have some attention and import placed in that city. Singapore, unlike many places, actually has a relatively clear licensing regime thanks to their 2019 Payments Services Act, which has made them a pretty desirable location. Unfortunately for Binance, the MAS is now saying that Binance may have breached Singapore’s Payment Services Act and thus ordered them to stop providing payment services to, as well as soliciting business from, Singapore residents. This is basically the story with Binance everywhere right now, regulators saying “you probably broke some of our laws, you gotta stop that.” Binance, for their part, is not shirking away and is trying to aggressively signal a shift to a more aboveboard business.

Along those lines, there’s also a report making news today that in an interview with the information, CZ said that Binance.US is just going to do what Coinbase did, aka go public. What’s the timeline? This is a quote from CZ: “So, if the business can grow consistently over the next three years, then three years should be sufficient for an IPO. If there’s a prolonged bear market for I don’t know, maybe three to five years, then it may be a little bit longer.” For now, Binance.US’s main focus is righting the ship after former U.S. Comptroller of the Currency Brian Brooks left his role as CEO after only a few months, Brooks left in the midst of a nine figure funding round that was designed in part to reduce CZ’s control. So, when it comes to Binance, the story continues.

Let’s shift now to another embattled player. Chris Giancarlo, the former head of the Commodity Futures Trading Commission, has resigned from BlockFi’s Board of Directors after just four months, which is just about the same amount of time as Brooks had and his stint as ceo at Binance.US. Giancarlo did not comment on the news, but after the news broke, BlockFi quickly released a press release saying that he had been replaced by Ellen-Blair Chube, a managing director and client services officer at William Blair. They said that Giancarlo will “continue to provide strategic counsel to the firm in an advisory role.” This can’t but feel like more bad news or, perhaps it is just reflective of a touchstone of bad news for BlockFi. Multiple U.S. states are accusing BlockFi’s flagship products, which are their interest accounts, of being unregistered securities. These legal battles are all at various stages of progress with the first state to come after them, New Jersey’s now multiple times delayed cease and desist order,  going into effect on September 30. Those legal troubles or perhaps the bad press also caused chaos for an intended financing round that would value the company at $5 billion. According to venture-capital-focused reporter Eric Newcomer, lead investor Third Point pulled out of that BlockFi round. If you’re interested in more on that, I did a whole show about it. Matthew Semadeni, a professor at Arizona State University that studies corporate governance, put Giancarlo’s departure this way: “It’s like somebody putting an offer on a home doing the inspection, taking a look at the inspection and saying, ‘Yeah, I’ll pass on the house.’” Ouch.

Finally, on the Brief today is such a random one. Remember BitConnect, that scheme and scam from more than four years ago, the scam that literally is synonymous with scams in crypto memory. Well, the SEC has filed a new complaint against BitConnect claiming that the people behind it conducted a fraudulent and unregistered securities offering to the tune of $2 billion. The 325,000 bitcoins that it took in were worth $2 billion then and around $15 billion today. This is the second complaint against BitConnect this year. The SEC also filed one against five promoters earlier in the year and won a $12 million judgment against two of them. In August, the associate regional director of the SEC’s New York Regional Office said: “We allege that these defendants stole billions of dollars from retail investors around the world by exploiting their interest in digital assets. We will aggressively pursue and hold accountable those who engage in misconduct in the digital asset space.”

So, here’s the thing about this. I’m completely fine with the long arm of the law being long. It’s more like, though, if they really want to protect investors, enforcement four years later without ever actually articulating a framework, other than continuing to insist that the Howey Test is fine. Seems pretty moribund to me. Of course, something like BitConnect was a scheme, that’s obvious. The question is all the projects that rightly or wrongly are engaging in good faith. Meanwhile, SEC Chair Gary Gensler spoke in front of the European Parliament yesterday, and it was a pretty clear replay of his recent greatest hits. He acknowledged the significance of the crypto industry, saying: “I think the transformation we’re living through right now could be every bit as big as the internet in the 1990s.” He said that it needs to be integrated with the current systems: “I’d like to note that financial innovations throughout history don’t thrive outside of public policy frameworks.” Finally, he pointed at stablecoins and unregulated exchanges as the key issue so again, nothing new, but clearly crypto is still meaningful enough on the SEC’s priorities to keep talking about.

But with that, let’s shift to our main topic. And nominally, it’s news about an institutional giant getting into bitcoin and crypto. Blockworks this morning tweeted: “The job application from Franklin Templeton, who is hiring a trader-crypto currency.” Yes, that is how they described cryptocurrency, “crypto currency.” Franklin Templeton is a company that was founded in 1947, went public in 1971, and is basically just kept growing. The firm has more than 450 different mutual funds. The story here, of course, is just the continued integration of Bitcoin into large institutional offerings and the current system. Along that front, Bitcoin Magazine reported on a similar story. Customers at VAST bank can now buy and sell bitcoin directly from their FDIC-insured checking accounts. VAST CEO Brad Scrivner has made the argument in the past that he thinks that banks should be the best place to buy bitcoin: “We’re familiar with regulation, we’re going to do the right things, we’re going to do things to make sure the financial system is kept safe and sound.”

There’s lots of different customers out there that may want to control everything and have their own wallet, their own passcodes. And then there are those who are crypto curious and may prefer to work with a bank or an intermediary, just because they don’t quite understand. Now that’s the same argument driving a lot of the partnerships that “Breakdown” sponsor NYDIG has been doing to get bitcoin buying, selling and holding straight into customers’ bank accounts. So what’s clear is the mainstream is just plotting right along and coming in bitcoin at its own pace.

In the meantime, BTC the asset is back up over $50,000 but still many are wondering where bitcoin is from a market perspective. For that, I’m going to do a mini “Long Reads Sunday” right in today’s episode by reading this excellent thread from my friend and frequent “Breakdown” guest Travis Kling. He writes: “Bitcoin is in an interesting spot at the moment, a couple thoughts. 44 days ago, the BTC chart was in big trouble. It had broken all sorts of support levels and had many people seriously doubting whether $30k could hold again.  Travis Kling @Travis_Kling · 17h In the subsequent 44 days, BTC covered a tremendous amount of ground. It did that thing it does sometimes where it just runs away from people. Oh you thought you were going to buy $30 or even lower? How about $48? A massive amount of damage has been repaired to the chart. We punched major Fibs ands points of control, retested and held S/R flips, battled with the 200D and then firmly reclaimed it. Impressive stuff. Purely from a TA basis, it looks like if $50 goes (it prob will) $58k will be on deck in no time. Then it’s a battle for new ATHs and potentially beyond.  Travis Kling @Travis_Kling · 17h Importantly, this price appreciation has come during a period of the lowest spot volume in the last year. Last time spot volumes were this low was mid-October and BTC price was $11.4k. We all know what happened next. This period of low volume makes sense from a seasonality perspective – it’s summer. But the market broadly has been enamored with all sorts of things lately that have nothing to do with BTC. We all know that. And that’s pulled BTC trading volumes away too.”

“This period of low spot volumes has also coincided with a period of low realized volatility for BTC, as shown below with the 4hr BBW. BTC is coiling. It has a tendency to do this from time to time. So Bitcoin is prob getting ready to make a move in one direction or another and it’s prob going to have some force behind it. Given the overall setup, and with many market participants on sidelines - having sold in prior months due to negative externalities, it seems like there’s a good chance volatility will come to the upside. Perhaps the most important factor at play is the potential launch of multiple 40 Act BTC CME Futures ETFs in late Oct. The likelihood of these getting launched appears to be misunderstood. If the market starts pricing in a higher likelihood, that should bode well for price. The biggest risk to this scenario playing out is increased tapering fears. That was a much bigger concern pre-Jackson Hole. But Powell seems content to punt on tapering at least until YE. If we print strong jobs numbers in the coming months, there’s risk that timeline moves up. The last thing I’ll note here is BTC Dominance, which is on its ass. Sitting 42, barely off the cycle low of 40 and not far from the all-time low of 36 from Jan 2018. The drivers of this move down in dominance are worthy of a longer discussion than a tweet thread. But it is fair to say BTC is relatively under-owned ATM. Should BTC go a heater to $58k in coming weeks it will be interesting to watch whether Alts lag, keep up or outperform.”

“In any case. This is the last week of summer. Labor Day Wknd is around the corner. If you “sold in May and went away” that was looking like a great plan until just a few weeks ago. Now you’re stuck contemplating whether to buy back in now, perhaps higher than where you sold. As we all know, BTC reflexivity is a total monster when it gets going. In both directions. After a rough couple months, reflexivity appears to be teetering on the edge of spiraling higher from here.”

A great thread there from Travis, I think you’ll agree. And for me, it’s just really about figuring out what are all the factors that are going to shape markets this fall. Can NFTs  continue their blistering, blistering growth? I mean, we’re talking 10x month-over-month from July to August, from $300 million in volume to $3 billion in volume. Will that continue? Will that bubble pop? Some major questions: can DeFi get heated that again? Will NFTs actually impact DeFi? Will that suck resources away from other things? Or will value start to consolidate in core assets in those ecosystems, or just in bitcoin, that flagship asset of the space as a whole? I’m not a trader, but those seem like pretty interesting questions to ponder as we get closer to this end of summer holiday weekend and the beginning of the fall. For now guys, I appreciate you hanging out and listening and until tomorrow, be safe and take care of each other. Peace!

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