Nov 21, 2023

Bitcoin (BTC)'s price remains little changed below $37,000 on the heels of the SEC suing Kraken on allegations the crypto exchange violated federal securities laws.

Video transcript

Joining us now to discuss more about the crypto markets is Pi Mas Ceo and founder Octavio Marenzi. Welcome back, Octavio. Good morning. Good to see you again. Uh So we, we, we're seeing a small sell off now. Uh And, and I say small because the, you know, uh it, it, we're not, it's not significant as you would expect from uh the recent sec action against cracking. And uh but when that story came out, there wasn't much of a reaction. What are your thoughts? I, I think there wasn't much of a reaction. No, I mean, it seems the market sort of took it in the stride. There's a bit of a movement, but I think it's hard to attribute to any one particular cause. Um We saw the Argentinian elections over the weekend too that should have given a big boost to Bitcoin doesn't really look like it did went up a bit, but I think that kind of movement is all in a days work for, for cryptocurrencies. So we see that kind of movement all over the place. I I think in terms of crack and the reaction the markets has basically been sort of a big yawn in the sense that the SEC has launched suits like this in the past before against some of the larger exchanges. Um And this is just to be expected, I would expect the SEC to gradually make its way through all the exchanges and basically serve them similar kinds of suits and say you're operating as an illegal exchange and clearing agency and broker dealer and bring them to task and they're just going to go through the list one by one I would expect. Well, I would say that the commingling as the commingling aspect is probably what makes it, uh I don't wanna say unique but certainly stands out from the run of the mill. Hey, you guys are trading in securities, uh kind of uh uh charge, you know, you know, II I think commingling is, is a pretty broad term and it really depends on what is meant by that. And I haven't really read through the details of what they're accused of having commingled. But you can imagine situations where commingling is not such a terrible offense. I mean, let, let's say, for example, you have a landlord and you pay a security deposit and the landlord puts that money into their own account. I mean, that's commingling in some states that's legal in others less so. Um but it's not really in and of itself a terribly horrible offense depending on what you're doing with the money and, and what the reasons are for doing it and, and whether it's legal or not, I mean, the SEC is basically saying you are a securities exchange and therefore we expect you to operate as if you were a securities exchange and securities exchanges are not allowed to commingle money. They have to keep all these things separate. Uh, if you're not saying it's a securities exchange, well, then, then you could potentially do it. So the whole argument, I think hinders on this, the question, is it a securities exchange or not? And if it is, well, then there's a whole bunch of different laws and rules that apply. Um, so co mingling, yes, it can be a very nasty, horrible thing to do and it might be quite harmless depending on exactly how it's done and how it's pulled off. Now, we have little market reaction to the S ECs action against Kr and little market reaction to a president in Argentina who wants to get rid of the central bank. What does that tell you about the crypto markets right now? Well, there's something else pushing them, right. So, so I, I think what we've seen is a fair amount of geopolitical uncertainty and that has been very, very beneficial for, for, for Bitcoin and other cryptocurrencies overall. So that's pushed them higher in recent months. So I think that's been the major story overall. Uh, uh, it's been very, very beneficial. What's interesting about it is that things like the traditional safe haven assets, like gold and other precious metals have not benefited as much, they've benefited a bit but nowhere near as much as, as Bitcoin has. And I suppose the other thing that's sort of hanging out there over the, the markets overall is this ongoing question of, when will the SEC actually finally approve its first spot, Bitcoin ETF? And is that ever going to happen? And I would say with these actions against cracking and probably more actions that we've got coming against other exchanges. I think the SEC is just sort of slow peddling this and really doesn't want it. And I think overall, the US government, like most governments have a tremendous amount of antipathy towards Bitcoin and, and Cryptocurrency. They see a threat to their monopolies on, on fiat currencies and want to get rid of them. And I think in, in the US, the US government has basically decided we're going to do this by basically regulating you out of existence. We're not going to come out with an explicit law that says this is not a legal undertaking, but we're going to do is basically make life very, very difficult for anyone who uses these currencies or promotes them or trades them. And that's what I think we see unfolding. It's basically sort of a death by 1000 cuts through 1000 cuts of regulation. So Javier Mile, uh he and I have something in common. It's not unruly hair. Although that is uncommon. Uh It is though we're, we're both uh, Austrian trained econ. Uh uh we, we came from an Austrian school of economics if you will. And, uh, as you know, this is, uh, he's, uh, he's got way more power than I ever do. I ever will. But he uh is taking over an economy and scrapping its central bank and it might create an amount of, I don't want to say currency risk, but certainly currency volatility in the area or uh some, some amount of volatility has the Bitcoin has the crypto market totally in any way, underestimated this kind of volatility. Have they overestimated it? What, what, what's your take on, on how the, the net effects of potentially closing down the central bank going to us dollar based uh US dollar based economy in a country like Argentina, which is no small, you know, there's no small potatoes there. Well, uh uh first of all, I, I would say that in a certain way he's exchanging one central bank for another. Uh And he's basically saying we're gonna shut down the Argentinian Central bank and, and we're going to become dependent on the US Central Bank, the Federal Reserve. I, I think if you sort of read between the lines of what he said, he's been somewhat, I wouldn't say ambivalent. He basically has said, yes, I want to shut down the Argentinian central bank. I don't think his support for the US dollar has been really that full throated though. Really when you, when you look at what he said and in terms of Bitcoin has been a bit bit, but this is very much in the tradition of the Austrian school and economists like Murray Rothbart and people of that sort who basically said you should privatize money, you shouldn't have the government involved at all. And I think that's what Millet's position basically seems to be though he hasn't articulated exactly in those terms, but, you know, the hardcore Austrian economists think you should privatize everything and, and including money. Um And so I think that is what his, his line of thinking is. He's basically said, I'm in a rough bar and I'm an anarcho capitalist, uh which basically means I don't think government should exist at all yet alone um have currencies. So I think Millet's position is basically that, that he thinks the government shouldn't be in the business of, of stipulating what currency you use or shouldn't use, that should be left up to the market. And of course, in all likelihood, the market in Argentina will switch to us dollars since that's the most liquid or most marketable asset that you can probably find there. So that's improvement of a sort, I suppose going from, from the Argentinian central bank to a US central bank. Um I'm sure the US central bank is much better behaved overall in terms of not printing money quite as quickly. But, um, it's still the temptation is there, I suppose and we've certainly seen them do that in recent years. So I think he's basically saying no, the government shouldn't determine who issues currency and how that works. The market should determine what money is and how that works. And, and that's, I think what he's promoting, pushing overall. I wanna go back to your comments on the spot. Bitcoin ETF pending applications. What do you think the chances are that we don't see an approval at all? You mean ever? Well, I mean, if we don't see one in the, in the next six months, I, I think it will likely we, we, we, we won't now listen, II I have no idea. No one at the SEC has called me and asked me about what I think or informed me about what they're thinking internally and why they're doing. It does just seem that they have slow pedaled this. They, there's no really good reason for them not to approve it. I mean, an argument could be made, I suppose that you want to protect investors against a very volatile our asset class and that it is not safe and it goes up and down. So with such extreme swings, however, as we all know, there are etfs based on futures that give the same kind of exposure and could potentially give you even more exposure if you wanted to do that through the futures and options markets. So that argument doesn't really hold water. The only argument really would be to say that there's something wrong on the custody side. So the way crypto assets get custody is insecure and unsafe. And we want to protect the customers from that though. They haven't really articulated that either. So they haven't really said here's a problem, fix it and we'll be able to prove it. Uh They haven't been that generous in their commentary back, but I suppose that would be an argument. So basically the way these things get held and stored, the whole safekeeping side of things is a bit unclear to them. And there's a risk that someone runs off with the money and that the investors are basically held with an empty bag. Then at the end of the day, that being said, there are of course industrial strength custody solutions out there to address that. I think fear perhaps the sec might not quite understand how that operates and, and all the custody offerings that are on the market currently, how those actually operate and function might be a bit beyond them. So their default is to say, I don't really understand that we don't understand the crypto custody world and therefore we're just not going to approve it. That would be an explanation. But I think more like explanation is they just have this, this profound antagonism towards cryptocurrencies and they just want to make things as difficult as possible. And that seems to be borne out by not approving these, these spot Bitcoin ETF S and also by all these lawsuits that they're bringing against anyone who touches cryptocurrencies.

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