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Ethereum vs Solana War, SAB 121 Veto, Ethereum ETF Updates, and more!

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Internet Capital
June 02, 2024

Hi Friends —

It was another wild week in crypto with fighting, ETF updates, and political developments.

For a full analysis, check out our latest YouTube episode. If you’re just looking for a quick overview, check out the “Takeaways” for each section below.

Comment below with your thoughts, and thanks for reading!

Markets

Bitcoin

BTC opened this week at $68,400 and is currently hovering around $68,000, marking a slight decline. This relatively stable performance comes on the heels of last week's price boost driven by the Ethereum ETF developments.

Ethereum

Similar to BTC, ETH has been relatively flat. ETH opened the week $3,823 and is currently around $3,791. Following off the impressive ~25% increase last week from the ETF news, traders are focusing on the key $3,600 and $4,000 price levels and awaiting further developments.

Ethereum vs Solana War

Origins

A crypto twitter war has broken out between Ethereum maximalists and so-called Solana “manlets'“ (don’t ask me how they got this nickname). The spark? A simple retweet from Ethereum creator Vitalik Buterin.

Vitalik retweeted an old tweet from a Solana mega bull named Ansem. The tweet read “a lot of the luna hate seems to come from the eth camp I’ve seen”.

The tweet was posted in January 2022, when the now-defunct Terra Luna project was having its massive price runup, before it exploded (it was basically a ponzi).

Context

Vitalik’s retweet was not directly provoked but comes on the heels of a week where celebrities have started launching coins on Solana. Caitlyn Jenner and Iggy Azalea are a few of the big names who’ve taken part.

Ansem has been recruiting celebrities and then endorsing their coins to his large twitter audience. Ansem’s and the Solana community’s view is that this is the way to onboard normal people to crypto technology.

The problem is that a lot of these celebrity tokens end up being rug pulled or just have massive insider allocations, which screws over beginner “investors”.

Analysis

Vitalik’s retweet is him expressing his view that the manic and sometimes degenerate culture often found on Solana usually ends poorly - like it did in Terra Luna. On net, more people will get burned than will benefit from trying to play these memecoin games that are everywhere on Solana, especially beginners.

I’m all for having fun and I actually enjoy memecoins from time to time, but let’s call a spade a spade - it’s just gambling. Everyone needs to understand what they’re doing. This definitely isn’t the case for many people buying these celebrity coins.

Last point - this whole situation epitomizes a weird duality. Crypto is simultaneously a revolution in financial technology and an enabler of risky, degenerate behavior.

We’ll explore this idea in depth another time, but I guess this is just what happens when you give the internet a built-in financial system…

Takeaways

  • Celebrity Involvement in Solana: Vitalik’s retweet reignited the debate between Ethereum maximalists and Solana supporters, highlighting concerns over the influx of celebrity-endorsed / meme coins on Solana and their potential for harm to beginner investors.

  • Risk of Memecoin Culture: The retweet emphasizes the risks associated with the speculative and often reckless nature of Solana's memecoin culture, drawing parallels to the catastrophic Terra Luna collapse, and cautioning beginners about the gambling-like nature of these investments.

  • Dual Nature of Crypto: This situation underscores the complex duality of the crypto space as both a groundbreaking financial technology and a platform enabling high-risk behaviors

Ethereum ETF Progress

Overview and Recent Developments

Last week, significant progress was made on the Ethereum ETF with the approval of the 19b-4 forms, paving the way for ETFs to trade on US Exchanges. The second and only next step after the 19b-4 approvals, are S1 filings from each company that wants to issue an ETH ETF.

S1 forms are informational documents required by the Securities Exchange Commission (SEC) for publicly offering new securities. The forms are primarily for disclosure purposes, so we don’t need to worry about them being approved - the 19b-4s were the nail in the coffin.

The SEC asked issuers to submit their first drafts of their S1s by this Friday May 31. It was reported that Blackrock and VanEck have submitted their S1s, so we’re officially on our way to being able to trade ETH ETFs.

Predictions and Market Impact

The S1 forms will receive comments from the SEC and undergo a few rounds of revisions. We predict that this process will take 4-10 weeks, placing the ETF launch in early July to mid August.

The only question now is whether there will be demand for the ETH ETF - see Episode 2 of our Youtube show for our takes (breakdown begins at 17:28).

Staked ETH ETF?

Last thing - Ethereum differs from Bitcoin in that it has a “staking” aspect. ETH holders can stake their tokens to receive a variable yield return on their tokens.

ETF issuers (BlackRock, Fidelity, etc.) have expressed interest in offering a staked-ETH ETF at some point in the future. Staked ETH ETF holders would receive full price exposure to ETH plus a variable yield return. To learn more about this, check out Episode 3 of our Youtube show (breakdown begins at 12:15)

Takeaways

  • Ethereum ETF Approval Progress: Significant strides have been made toward launching Ethereum ETFs, with the approval of the 19b-4 forms and initial S1 filings from major firms like BlackRock and VanEck, setting the stage for trading on US exchanges.

  • Timeline for Launch: The SEC will review and comment on the S1 forms, with the process expected to take 4-10 weeks, potentially leading to an ETF launch between early July and mid-August.

  • Future of Staked ETH ETFs: There is interest from ETF issuers in creating staked-ETH ETFs, which would offer full price exposure to ETH along with variable yield returns from staking, presenting a unique investment opportunity.

Biden Vetos SAB 121

Overview of the Veto and Its Implications

President Biden’s recent veto of SAB 121, an SEC Staff Accounting Bulletin, has significant implications for the crypto industry. The SEC’s bulletin aimed to treat crypto holdings differently from other assets, potentially preventing banks from offering crypto custodial services.

The bulletin effective prevents banks from offering crypto custodial services because it requires crypto custodial firms to record the crypto holdings of its customers as liabilities on their balance sheets

Context

The veto reflects a complex political landscape, with Democrats balancing pro-crypto and anti-crypto sentiments. The move contrasts with recent regulatory advancements like the Ethereum ETF approval and the White House initiating outreach to the crypto industry.

Regardless of the Democrats’ or Republicans’ current stance, one thing is clear: Crypto is becoming a mainstream political issue. This is definitely a developing narrative to keep your eyes on over the coming months.

Takeaways

  • Biden’s Veto on SAB 121: President Biden vetoed SEC Staff Accounting Bulletin 121, which would have required banks offering crypto custodial services to record customer crypto holdings as liabilities, effectively preventing such services.

  • Political Landscape and Crypto: The veto highlights the complex political environment surrounding crypto, with the Democratic party showing a mix of pro-crypto and anti-crypto positions, in contrast to recent regulatory advancements like the Ethereum ETF approval.

  • Crypto as a Political Issue: The growing attention to crypto in mainstream politics signifies its increasing importance, making it a critical narrative to follow in the coming months.

Other News

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