August 18, 2023
Greg Cipolaro

Research Weekly - Crypto Corrects Even as ETF Activity Heats Up


  • A decision on Grayscale’s legal case with the SEC to convert GBTC to an ETF is expected in the coming months.
  • Wall Street is rapidly increasing ETF applications, although the market typically favors first movers, and not all products may prove economically viable.
  • Recent price action validates the Golden Cross pattern observed six months ago – short-term negative price performance with the potential for appreciation over the long term.

Expectations for a Decision in the Grayscale Case Rise, then Fizzle

On Tuesday, expectations rose for a decision in the legal case between Grayscale and the SEC involving the former’s attempt to convert the Grayscale Bitcoin Trust (GBTC) into an ETF but ultimately fizzled when an opinion failed to be rendered. As a reminder, on March 7th, 2023, the US Court of Appeals for the DC Circuit heard oral arguments in Grayscale’s petition to review the SEC’s disapproval of the change order seeking to list shares of GBTC on NYSE Arca that was first filed on June 29th, 2022. While the three-judge panel is expected to rule on the matter in the next few months, the most precise timing we know regarding the matter is “before the end of fall,” according to Grayscale CEO Michael Sonnenshein.

The reality is that predicting the exact timing of such a legal ruling cannot be done precisely. The 160-day “timeline” from oral argument to court opinion that the investing community seems to be relying on is falsifiable under even the lightest of scrutiny. Looking at only the opinions issued in August so far highlights the wide range of observations from when a case is argued to when the court makes a decision. A multitude of factors, many of which are not observable from outsiders, may affect how long it takes a court to render a decision – agreement on an opinion, timing of other pressing matters, travel, staff availability, just to name a few.

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Using the range of observations (min, average, max) from August decisions, one could imply that a decision would have been rendered as early as May 6th, on average on September 13th, and at the latest January 30, 2024. The average date of mid-September seems to line up with “by the end of fall” expectation. However, we are fairly certain just August observations are not a representative sample from which to draw conclusions about timing. Given that, we will keep watching for an opinion that we expect sometime over the coming weeks and months, but with no specific date (opinions do seem to come mostly on Tuesdays and Fridays). The only thing we can be assured of is that the court will one day render an opinion, and with each passing day, we are one day closer to that date.

Wall Street is “Stacking Apps”

“Stacking sats” is industry jargon for bitcoin holders who continue to add to their bitcoin balances (sats is short for a “satoshi”, the smallest divisible unit of a bitcoin). As ETF applications continue to roll in, this past week saw 4 more, Wall Street, in our tongue-in-cheek opinion, appears to be “stacking apps.” By our count, and we could have missed some, there are presently 17 ’40 Act funds in the works and 8 ’33 Act ETFs, plus the Grayscale Bitcoin Trust conversion appeal. If Wall Street has its way, the supply of funds available to investors is about to skyrocket. In that context, we wonder about demand (we took a stab at some estimates a while back). While we are certain demand will emerge, especially for funds that are giving investors access to entirely new products, like a spot ETF, these products tend to have a winner take most dynamic, and one that favors the first mover. Unless the products are sufficiently differentiated, either through distribution, fees, or investment strategy, it is unlikely all of these products will be economically viable.

Weekly Futures-2

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Weekly Spot

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Checking Back in on an Old Technical Signal

We don’t spend a lot of time in this space talking about technical analysis, but one set of signals we have looked at are crosses, specifically Golden and Death Crosses. A cross is when one moving average passes through another moving average of a different time horizon. In the case of Golden Crosses, this is when the 50-day moving average passes up through the 200-day moving average. At the time we wrote about the last Golden Cross seen in February, we observed that it was more of a positive long-term indicator, while performance over the short-term was mixed at best or even negative.

Six months have just passed since the appearance of the Golden Cross (with no Death Crosses), and it seems that this most recent cross continues to affirm our prior observation. Golden Crosses appear to be negative indicators in the short term (7- and 30-day measurements) and positive indicators in the long-term (+90 days). Of course, we have yet to see where bitcoin lands 360 days from the most recent cross.

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Market Update

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After several weeks of rangebound trading, bitcoin dropped 5.2% on the week, followed by a precipitous drop on Thursday evening, which took the price to under $25,250 briefly. While no one fundamental piece of news could be attributed to the correction, the Evergrande bankruptcy, a bearish call by a noted technician, a WSJ article which had revealed SpaceX had sold all its bitcoin, and risk markets, such as equities, which have been weak since the beginning of the month, likely all played a role. Liquidations were brisk, with $488M worth of long bitcoin futures and swaps positions being liquidated across exchanges in the past 24 hours. At this point, bitcoin has nearly retraced the entire bump it got from the filing of spot ETFs. One "tell" about the move on Thursday was the price action in alts on Wednesday. Unexplained significant weakness was seen in many altcoins that perhaps portended the move in the major coins, such as bitcoin.

As mentioned, equities continued their selloff with the S&P 500 down 1.4% and the Nasdaq Composite down 2.9%. Gold and bonds offered no downside protection this week, with Gold down 1.6%, investment grade corporate bonds down 1.7%, high yield bonds down 1.3%, and long-term US Treasuries down 2.3%. Oil also fell on the week, down 3.3%.

Important News This Week


Bernstein Believes Bitcoin Spot ETF Approval Could Push the Next Bull Run - CoinDesk

CME Group and CF Benchmarks to Launch APAC Reference Rates for Bitcoin and Ether on September 11 - CME

Fundstrat's Tom Lee Predicts $180,000 Bitcoin in 2 Years - CNBC

Coinbase Finally Wins Approval to List Crypto Futures in U.S. - CoinDesk

Regulation and Taxation:

Stablecoin Regulation Good for Dollar, Says Former Binance.US CEO - The Block

Coinbase Launches Advocacy Organization Ahead of Upcoming Legislation - The Block

SEC Said to Be Poised to Allow US Debut of Ether-Futures ETFs - Bloomberg

Judge in Ripple Case Grants SEC Request to File Interlocutory Appeal - The Block


Prime Trust, LLC Files Voluntary Chapter 11 Petitions - Prime Trust

Has Binance Blown Its Chance to Rule the Crypto Markets? - FT

Crypto Market Maker GSR Scales Back, CFO and Other Top Executives Depart - The Block

Ledger Launches Paypal Integration for Buying Bitcoin and Ether - The Block

Bitmain to Reveal Groundbreaking Antminer S21 at 2023 World Digital Mining Summit -

PayPal To Halt UK Crypto Sales Until 2024 - Reuters

How Lightning Powers the Global AI Economy - Lightning Labs

BitGo Secures $100M Series C Funding At $1.75B Valuation - BitGo

A Rare Look into the Finances of Elon Musk’s Secretive SpaceX - WSJ

Upcoming Events

Aug 25 - CME expiry
Sept 1 - Expected SEC response date for BlackRock iShares ETF

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