The Spot Bitcoin ETFs Will Be Trash
(Oh, and Happy New Year!)
Happy New Year!
I hope everyone’s 2023 wrapped up nicely and that your 2024 is off to a good start.
In reflecting on 2023, one of the things I was most grateful for was the fact that I had the opportunity to speak with so many brilliant and interesting people from around the world for my podcast.
Yesterday, I wrote a recap of one or two things I learned from each of my guests. (Click “Source” below the following image if you’d like to read the full recap.)
Also, I recently decided to create clips from the interviews in which I showcase insights from my guests that deeply resonated with me.
Below is the first of such clips:
If you’re mind didn’t fully explode after watching that, let’s move on.
If it did and you’re now dead, thank you for watching and for subscribing to this newsletter. Sorry about murdering you with awesomeness. And my condolences to your friends and family.
Looking forward into 2024, I’m not quite as bullish as everyone else seems to be on bitcoin.
One of the reasons for this is that I think the spot bitcoin ETFs that may get approved as early as tomorrow are both trash and a trap.
The spot bitcoin ETFs = trash + trap
The following is the text from a tweet thread I published two days ago.
"Watch what they do, not what they say."
I saw many people share something to this effect when it was announced that JP Morgan would be an authorized participant in the BlackRock spot bitcoin ETF, and I was confused.
I say, "Watch what they do AND what they say."
Here's why:
Let's start with some background.
A few weeks back, JP Morgan CEO, Jamie Dimon, said to Senator Elizabeth Warren in a hearing that "if [he] were the (US) government, [he'd] close it down" in reference to "crypto" — or "Bitcoin, etcetera," as he put it.
However, yesterday, it was revealed that JP Morgan would be an authorized participant in BlackRock's spot bitcoin ETF, which many believe will come to market in the next week or so.
Some felt that JP Morgan signing on to do this was a signal that the bank is capitulating to Bitcoin — even while the bank's CEO talks a completely different game in public.
I'd argue that it's a signal for the complete opposite.
If the spot bitcoin ETFs are approved, settlements for the ETFs will be cash-in, cash-out, which means that they won't be settled in bitcoin, but in US dollars.
This creates more "paper bitcoin" — or IOUs for bitcoin, which can serve to suppress the price of the asset.
In the last cycle, we didn't see the price of bitcoin rise as high as many thought it would, because many people weren't actually buying bitcoin.
Instead, they were buying IOUs for bitcoin on exchanges like FTX, while the exchanges weren't actually purchasing and holding bitcoin on behalf of their customers. It will be harder for spot ETFs to get away with not holding actual bitcoin, but it can still happen.
JP Morgan's signing on to be an authorized participant in a spot bitcoin ETF isn't capitulation from the bank or a win for Bitcoin.
It's the opposite of both.
Big banks and financial institutions will profit by charging fees to manage spot bitcoin ETFs, shares of which will likely just be non-redeemable IOUs for bitcoin.
At the same time, the price of bitcoin will be suppressed, because people aren't buying the asset itself.
What you're seeing here is Jamie Dimon working with the US government — Sen. Warren and the SEC in particular — in its fight against Bitcoin.
And I wouldn't be surprised to see Sen. Warren's anti-Bitcoin bill get passed, effectively outlawing holding bitcoin in non-custodial wallets, in the wake of these spot bitcoin ETFs get approved.
The approval of the spot bitcoin ETFs will give the powers that be the ability rationalize the passing of the bill in that they can now argue that if you want exposure to bitcoin, you can just buy the spot ETF, which, as I said, isn't real bitcoin.
So, in closing, I'll repeat:
"Watch what they do AND what they say."
JP Morgan is part of the US government's attack on Bitcoin, and yesterday's announcement is further evidence of this.
And analyst Will Clemente added a new dimension to how bad these ETFs could be earlier today:
6102 = The executive order passed in 1933 which required Americans to surrender their gold to the US government. It was easy for the US government to enforce this order because most Americans stored their gold in banks and didn’t hold it in their own custody at the time.
So, if you buy one of the spot bitcoin ETFs that will likely be approved in the next week or two, know that:
You’re buying paper bitcoin, not bitcoin itself.
You’re giving money to the financial institutions that bitcoin was created to replace.
You’re making it easier for the US government to confiscate bitcoin.
You’re likely taking part in suppressing the price of bitcoin.
And please remember as we move into this new year that not only are the spot bitcoin ETFs trash, but so are the following people and institutions:
Jamie Dimon and JP Morgan
Gary Gensler and the SEC
Senator Elizabeth Warren
These people and institutions are trying to keep you trapped in a burning building as it crumbles.
Let’s get free in 2024, not give more power to oppressors.
Best,
Frank
P.S., I’ll send out a market update to paid subscribers either later today or tomorrow.
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