Sep 5, 2023

Bitcoin (BTC) continued its subdued start to the week, trading below $26,000 for the past 24 hours.

Video transcript

Bitcoin is retreating after the sec delayed key ETF decisions that were expected on Friday, damping traders hopes of a long term recovery. Joining us now to discuss the crypto markets is Von Strat Global Advisors, Head of Digital Asset Strategy, Sean Farrell. Welcome to the show, Sean. Hey Jim, thanks for having me. Thanks for being here. All right, you have identified three major risks that could potentially halt a rally in the markets. Tell me what these are. Yeah, I think before getting into that, it's important to back up and understand uh what we look like right now from a macro picture. Uh I think the story of the past few months uh has really boiled down to crypto idiosyncratic crypto Pacific cattle lining up with uh frankly some disadvantageous macro conditions. So if you look, if you go back to the Black rock application in June, uh around mid June that actually marked the local bottom for the, for the DXY, the, the US dollar index uh which um Bitcoin and other liquidity sensitive assets uh trade inversely to uh pretty closely fast forward to the ripple ruling. We had another, you know, very substantial crypto particularly in alt coins. Uh but that was also faded shortly thereafter, uh due to similar forces uh around rates, uh the dollar, um, and central banks pulling in, um, reeling in liquidity. Um Now, obviously a couple of weeks ago, we had the huge grayscale ruling which was expected and we obviously got a pump, uh, and why we were, uh and still remain tactically optimistic is that, uh, you know, there are signs or reasons to expect that the dollar should roll over, uh start rolling over at some point this week, uh should start to see some upside resistance in rates. Uh But obviously, should that not transpire? Uh I think it's right to expect Bitcoin to continue to um trade in a rather heavy fashion in it's uh go back to the, you know, specific uh risk that we had outlined. Uh one thing to consider is seasonality. Sometimes this is a very, um it's a little squishy of a concept, right? Um But, you know, it's sometimes can be seen as a self reinforcing uh factor to consider if everyone else thinks that Bitcoin does terribly in September. Uh you know, other market participants will automatically derisk just in anticipation of that and it's a self fulfilling uh cyclical process. Uh And then the other two risks, you know, specific to crypto, I think a lot of people are um uh might be weighing on a lot of traders minds. One is the Binance risk obviously, we saw the sealed motion filed by the SEC last week which intimates that there is a concurrent doj invest going on. You know, we see that as a very acute risk. Don't think it's actually going, I think actually a lot of it probably already priced in, but I think that's something that is likely weighing on uh the incremental buyer here. And then obviously the government still has about uh 32,000 Bitcoin to unload before the end of the year. So that um certainly in a liquid environment that's going to be absorbed pretty quickly, but it could always uh um uh you know, weigh on, uh weigh on prices in, in the very short term. You know, our last guest outlined several different outcomes um in the spot Bitcoin ETF Saga. Where do you see the decision on spot Bitcoin ETF S landing? Yeah, we're optimistic. You know, I think a couple of months ago we put out a uh 75% you know, likelihood of approval uh within this application period. The first official deadline I think is in January. So that's probably where the clock would, uh our timeline would be capped at uh being January. Um But, you know, we're obviously very optimistic if you look at all the options for the ETF, you know, I think Rick outline outlined them very nicely, but to just quickly go through them again, you know, there's obviously the um possibility that the SEC just goes back, double down, uh identifies another, another rationale for denying the spot Bitcoin ETF S. Um But in that case, you know, they probably have just another lawsuit on their hands and not sure that they have the um uh you know, stomach for that, either from a monetary or from a, a manpower perspective. Um Obviously, they could appeal the court's decision within 45 days. Uh That would, that deadline would come up, I think October 13th or 14th. Um uh but again, like if you read, if you really read the language of the judges that rule in this case, it doesn't leave much open for uh an appeal. It was actually pretty um uh definitive language, at least from my perspective. Obviously, I'm biased. Uh Then the other two options are, you know, potentially revoke, you know, Rick had mentioned, they could just revoke the E futures ETF, but, you know, II I wouldn't, that definitely would not be a face saving endeavor for the SEC, you know, because they would look kind of silly for approving that futures ETF, they been, they would essentially be saying that they were wrong. And uh certainly as a politically charged organization, I don't think they would like to do that. Then the fourth option is just to, you know, tip their cap to the judicial system and, you know, approve the spot and ETF so, and, you know, to us that seems like the most likely uh for everyone involved. I want to turn down, turn now to another recent court decision last week in your court dismissed a proposed class action lawsuit alleging that Unice was responsible for causing harm to investors by allowing scam tokens to be issued and traded on the protocol. Uh What does this mean for D I do you think? Yeah, you know, this was huge and obviously that talked about due to the other uh huge case um victory over the past couple of weeks. Um But this is great because I think a lot of the SEC is basically saying that they, hey, they have a jurisdiction over these uh software platforms that uh can make a decision over what is traded on their distributor platform. But you know, ju the um uh judge in this case is taking a very logical stance and saying that no, this is, you know, a this is a neutral um uh playing field for anyone wants to issue an asset in an er C 20 standard. And the onus is actually on the issuer of the scam token, they are the perpetrators, not necessarily the uh uno swab LP S or, you know, swap developers who deploy, deploy the smart contract that are at fault. Um And I think what is particularly um important to note of this ruling is that the judge in the case specifically cited how um there is a lack of regulation, clear regulatory um, uh, clear rules of the road in terms of how this should be regulated and that the SEC does not actually have the purview to step in here and, um, uh, and be the so-called cop on the beat as, uh, as they like to call themselves. Um, and that's been the big, that's been a big issue. Right? Is that, um, a lot of people in the crypto industry myself included, I think that the SEC is largely stepping on congress's toes when it comes to regulating the industry. And you know, obviously, our view is that this new, you know, this new technology, this new internet money needs new rules of the road in to in order to regulate appropriately. Let's let's turn now to uh Bitcoin itself, fs insight, which is an accessible version of fundstrat research. Recently tweeted, we are currently in a seasonally unfavorable period for crypto, a trend that has been fairly consistent since Bitcoin's inception. Last time Bitcoin posted a positive return for September was in 2016. What are your expectations for Bitcoin this month? Yeah. You know, obviously, it is something that we should, we need to um acknowledge and something that we should respect, right? I think um what's unique about this situation is that there are a lot of crypto specific catalysts that are uh liable to hit the tape at any moment's notice. So that's obviously um something that uh it gives us hesitation of taking risk off. Um Right. And obviously there are intra month, month moves to, uh to prepare for and to position around. And so, you know, I think there's, um, I think there's a good likelihood that we chop around a bit this month to be frank. Um It will depend a lot. Um, as I mentioned earlier on the way the dollar moves, uh and how rates, whether they reach the ceiling or not. Sean. I gotta ask you if you think that Bitcoin um is on a bull run at Blockchain week. Former Bit Ceo Arthur Hay said that a bull run for Bitcoin started back in March when the three banks collapsed. He said it's gonna take 6 to 12 months for the market to react to that. What do you make of these comments? Yeah, I mean, look, I think this comes down to how we define a bull run like, right, like right now, if we look at where we are from one, it's tough to say that that isn't a bullish uh run for asset prices for crypto prices. Um But you know, so it comes down to how we define bull market. I do generally agree that we are into, we have seen the cycle lows and we are into the next cycle. Um And uh I generally agree with Arthur in saying that the uh global tightening cycle has peaked, right? It particularly on a relative basis. Uh I think, you know, we see the fed starting to get to the end of their rope, uh lots of disinflation, uh domestically deflation out of Asia. Uh And so I think there's good reason to anticipate, you know, stepping back, looking at the, looking at things from a cyclical perspective that we are at the very start of a uh you know, a run. All right, Sean, we are gonna have to leave it there. Thanks so much for joining me this morning. Thanks so much. That was fundstrat Global Advisors, Head of Digital Asset Strategy, Sean Farrell.

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