ETF Delays, Crypto Rockets, and Tether Worries

Friday, September 21st


☔️Happy Friday! Although I’m writing to you from rainy Washington DC, the crypto markets are anything but gray today. We’ve added about 12% to the overall marketcap since yesterday, with Ripple’s massive 50% day leading the charge.

Cheers to continuing the fun over the weekend. If you’re missing us, feel free to join the (always good) conversation on our Telegram group!



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3 things you need to know:

One: The SEC is seeking public input as it debates a proposed rule change filed by CBOE. The rule change would allow CBOE to list the VanEck SolidX ETF proposed earlier this year.

  • Hold your horses: the SEC has delayed this decision once already and has room to delay it again until February. Under the terms of this proposal, VanEck and SolidX would create a BTC trust in which VanEck would issue shares. The SEC is looking for comments, so if you feel strongly about a Bitcoin ETF decision -- reach out to them!

  • A community effort: It is quite encouraging that the SEC is seeking participation from the public. I have often said that a team effort is required in order to pass conducive, effective legislation that will foster industry growth while protecting market participants without hindering innovation.

  • Is an ETF coming any sooner? The short answer is no, in my opinion. The proposed rule change is likely to be delayed until February. It is unlikely that we will see an ETF until mid-late 2019, at the very earliest due. I’ve written about what is needed for an SEC approval before, and it really just boils down to SEC concerns regarding manipulation of the markets.

  • Price action: It has been interesting to see price action following the past few SEC decisions/delays. The market has largely baked in these decisions, so BTC didn’t crash. In fact, the past couple of times, including after yesterday’s decision, BTC has actually appreciated in price. ETF hopium/despair isn’t the only thing on people’s minds anymore. There are a lot of other developments going on in the space, and market participants have become more realistic about the probability of an ETF approval.

  • Read more...


Two: Antpool has announced a partnership with the Houston Rockets. Antpool is a Bitmain subsidiary and the second largest mining company in the world,

  • Houston Headquarters: Antpool chose Houston as it’s US headquarters due to its strong market. The firm also announced a $500mm investment in a mining facility in Texas.

    “As far as professional sports teams go, the Houston Rockets are legendary across the globe and what better way to continue the momentum of our U.S. expansion than partnering with the prolific Houston Rockets basketball club, the No. 1 team in China. As the cryptocurrency industry around the globe continues to evolve and develop, it is going to be more and more important for companies like AntPool to lead the conversation and conversion of consumers to adopt and understand digital currencies.”

  • Building community: Because of Antpool’s investment in Houston and the mining facility in Rockdale (and the jobs it will create), tech-forward Texans have been very willing to work with Antpool and to explore crypto. The Rockets have partnered with them and will include an Antpool exhibit in the stadium this year. The Rocket’s owner announced that his auto company will now accept payments in BTC and BCH. A little goodwill goes a long way. The fact that the Rockets are the #1 team in China (thanks Yao) also helps…

  • Hidden motives? Bitmain’s IPO is coming up soon, and Antpool’s performance is a key component to the valuation of Bitmain as a whole. It makes sense that they would make big, public moves in the time leading up to the pricing of its equity offering.

  • Read more...


Three: A new academic study by Australian Bschool Professor Dr. Wang Chun Wei, claims that Tether issuance has no impact on the price movements of Bitcoin. There have been plenty of conflicting stories regarding Tethers influence on the cryptocurrency markets, but rarely have there been academic papers that explore the issue in depth.

  • Nothing found: The paper itself explored the statistical relationship between Tether issuance and Bitcoin price movements, and came to the conclusion that the predictive model they built was no more accurate than a null model.

    “We construct a VAR model and show contrary to investor expectations, Tether issuances do not impact subsequent Bitcoin returns, however, they do impact traded volumes. We also document an increase in Tether trading following a subsequent decrease in Bitcoin returns.”

  • Trading volumes and Tether issuance are correlated: One thing the study found was that an issuance of Tether was followed by an increase in trading. This makes eminent sense. In periods of high demand for Bitcoin, there should also be high demand for Tether. Dr. Wei acknowledged that trading volume is correlated with price, Wei went on to say:

    “However, you cannot use trading volume to predict price, as the effect is simultaneous. In my paper, I state that past trading volumes do not impact future returns.”

  • The controversy remains? There are two sides of the coin (ha) to any Tether conversation. One, Tether actually have backing. Two, do the issuers of Tether manipulate Bitcoin price? Long term readers of CryptoAM know my take on the first point pretty well. I’m a firm believer that the odds of a Tether collapse are next to null. Bitfinex is inextricably tied to Tether, and they most definitely have the revenues to back up the $2.4B outstanding debt. They also have the incentive to keep the system going, because if Tether goes down, so does Bitfinex. The second issue is a bit more hairy, and it’s good to see a sophisticated take on the matter. The actual paper is quite good, and I’ve linked it below.


Also in the news:


Market Outlook:

Quick Take

Direction: Bitcoin continued it’s run, breaking past 6500 and hitting the predicted 6700, which was a strong supply zone. We’re currently trading at this key level. We wicked above 6750, but are still holding steady around 6700.

Generally what happens on runs like these is some period of consolidation before further action. I expect to trade within in the 6680-6720 range for some time before a large move. Based on the overall market and sentiment, I expect to a move upwards to 6800.

Many altcoins have exhibited strength, indicating volume and speculation is beginning to flow back into the markets (namely Ripple gaining 112% over the past 3 days).

The market seems to be primed for another large run up like we saw last August. On Balance Volume for Bitcoin shows signs of classic accumulation, which has happened before every major rally. A break of 6800 would confirm this for me, and I would move more of my BTC holdings into alt coins.

Key Support:  6700, 6750, 6800

Key Resistance: 6620, 6580

Actions: I’ll be looking to enter some altcoin positions that historically over perform during uptrends. I’ll be hedging exposure to alts with a BTC short position.

Fear & Greed

This is the first time F&G has broke 60 in some time. We’re not quite in greedy territory yet, mostly due to Strength (which is a measure of overall market performance) and lack of overall alt-coin speculation (sans Ripple).

Here’s a reminder of what these criteria mean


Around the corner:


What I’m thinking today:

One thing that’s always fascinated me about crypto are the massive fundraises for similar products. We’ve seen plenty of cryptocurrencies launched that focus on identification, supply chain, payments, credit cards, etc. The list goes on, with multiple projects trying to solve the same issues.

One would expect an industry in winter to experience significant M&A activity. This begs the question, why hasn’t it happened in cryptocurrency yet?

Well, the first answer to that question is it already has been happening, but mainly just by cryptocurrency focused companies, and not ICOs themselves. For example, Coinbase has been on a buying spree, spending hundreds of millions of dollars on acquisitions over the past few months. Circlepay bought Poloniex for $400m, and BitGo bought Kingdom Trust for an undisclosed sum.

There have also been ICOs that have acquired traditional companies that align with their mission. For example, Tron recently acquired BitTorrent, and MetalPay acquired Crumbs (a crypto version of Acorns).

I’m of the opinion these types of acquisitions will likely become more prevalent as time goes on. Why? Three reasons, stolen straight from Spencer Bogart:

  1. There are many projects with huge balance sheets, due to massive price appreciation and fundraises over the past year.

  2. Second, most do not have solid infrastructure. Spencer refers to these as CFBLs (Cash Flush, Business Light)

  3. Third, news affects the cryptocurrency markets. If you announce an acquisition, your own personal token may appreciate 5-10% in value, which would cover the cost of the actual acquisition…making it essentially free.

Puzzlingly, what hasn’t been common is the merging or acquisition of ICOs by other ICOs, despite what seem on the surface like obvious synergies. There are plenty of ICOs that are tackling “crypto-loans”, and they’re not doing so well as the bear market takes its toll. In the traditional world, it would seem prudent to consider a merger. In the crypto world, this is complicated.

Although ICOs may have common interests, the introduction of tokens make it difficult to merge communities and systems. Seeing as tokens are inextricably linked to the value of the platform, it is in neither founders interest to merge, as it would likely require one of them to give up the value of their token.

In the traditional world, one would give up stock for capital. In the crypto world, the incentives might not be there. Many founders truly believe in crypto (as they should), and would be unwilling to part with their chance at riches due to the “coming bull run”. People actually do think this way. The traditional market may offer 30%+ premiums for stock, but that is unlikely to sway your average crypto founder.

The game theory of merging in a tokenized world is much more difficult than merging in the real world. If the company has chance at lasting for >6 months, it’s likely in their best interest to ride it out, not give up their token, and hope for a bull run. It’s only when they are clearly about to fail, that they might be willing to merge, or sell off assets — and at that point who wants to buy them?

In other words, ICO <-> ICO mergers seem to be a market for lemons.


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