Pongo Points 10/26/23

BlackRock Bitcoin ETF Hopes vs. Reality | New York Sues Crypto Giants | Clean Off-Grid Energy for Africa | Moody's Gets Artificial Intelligence | Arthur Hayes Speaks on War and Bitcoin

1. BlackRock Spot Bitcoin ETF Listed Then Pulled from Clearinghouse

Why it’s interesting: The world’s largest asset manager had its Bitcoin ETF ticker listed on the Depository Trust & Clearing Corporation (DTCC) - the company that clears NASDAQ trades - and subsequently pulled 24 hours later.

  • A DTCC spokesperson has since advised that it’s not an indication of an ETF listing; simply preparatory work in the event there is regulatory approval.

What stands out: Because a spot Bitcoin ETF appears imminent to the community, many in the crypto industry were quick to front-run the potential rush of liquidity into Bitcoin, thus pushing up the price of Bitcoin to $35,000.

  • Despite the false positive, Bitcoin remains high as buyers hold onto hopes of a spot ETF coming soon, with prices holding around $33,000 to $35,000.

What’s next: The approval of a spot ETF is likely to bring massive inflows to the industry and push the price of Bitcoin much higher, with some analysts and crypto companies anticipating an initial spike to $42,000 to $56,000 per Bitcoin.

2. NY Attorney General Sues Gemini, Genesis, and DCG

Why it’s interesting: The NYAG is picking a fight with well capitalized crypto firms impacted by the fall of FTX and Alameda, despite those companies having histories of vigorously defending themselves in court.

  • The complaint reads similarly to previous suits brought forth by the NYAG, and is likely an effort to administer penalties and fines on the crypto industry while building case law for future regulation.

What stands out: The NYAG leans heavily on New York’s Martin Act, which is widely regarded as one of the most severe and broadly defined state anti-fraud laws, and offers prosecutors extraordinary powers to investigate these firms.

  • Key to many of the NYAG’s previous actions against crypto companies, the Martin Act is a powerful tool for prosecutors seeking a investigatory powers over firms whose defense depends on lack of intent.

What’s next: Despite the appeal to “consumer protections,” the lawsuit will likely result in hurting more consumers than it purports to help, as these crypto firms must now spend time and money defending themselves against this action rather than recovering and disbursing funds to those affected by the collapse of FTX et al.

3. Clean Energy Mini-Grids Powering Rural Communities

Why it’s interesting: Rural communities across Africa and Asia have struggled to wean themselves from diesel powered electricity generation, but Husk Power Systems recently received massive funding to “clean up” those mini-grids.

  • Mini-grids are small energy loads and sources (quite literally a mini power grid) that are typically isolated due to their remoteness from the main grids that power wide areas.

What stands out: Husk Power touted their digital payments method used by customers from India to Nigeria, stating that it offers a more convenient way for their clients adopt their systems.

  • Many rural communities are embracing digital payments across the globe, with economies like Nigeria flocking to cryptocurrencies amidst cash shortages, suggesting that internet connectivity is not a barrier to entry for crypto.

What’s next: There’s a concurrent shift in developed areas to go “off-grid,” using technologies like Tesla’s Powerwall, to reduce reliance on dirty power grids. It’s likely that these two themes will bolster investment in clean energy generation technology.

4. Moody’s Is Applying Artificial Intelligence to Speed Up Analysis

Why it’s interesting: Moody’s is partnering with Google to create custom and fine-tuned AI models to help boost employees’ productivity while performing financial analysis.

  • The ratings giant’s use of AI focuses on streamlining work for employees, rather than replacing bodies with software (for now).

What stands out: There’s a certain irony to having AI tools summarize work generated by humans that is intended to show attention to detail and understanding of a particular subject, such as financial reports and disclosures.

  • This begs the question: Why not simplify financial statements and disclosures, rather than having AI summarize unnecessarily verbose or complicated documents?

What’s next: Artificial intelligence models are still relatively fresh, but have grown from theory to public applications with hundreds of derivative applications over the course of a year. It’s only a matter of time before integrations become commonplace.

5. Arthur Hayes on Global Conflict and Capital Flight to Safety

Read it on Arthur Hayes’ Substack here: The Periphery

Why it’s interesting: Hayes comments on the selloff of long-term US Treasuries, suggesting that it’s a reaction by the market in anticipation of escalating kinetic conflicts, and how it drives investor interest to gold and Bitcoin.

  • Arthur Hayes is a notable figure in the crypto industry, made famous for founding the Bitmex exchange, and has deep knowledge of the inner mechanics of the traditional finance world thanks to his experiences at Deutsche Bank and Citigroup.

What stands out: Hayes expects any intensification in current global conflicts to drive inflation higher and push interest rates up until something breaks - at which point, the US Federal Reserve may be forced to intervene in the free economy and fix the US Treasury market.

  • Hayes maintains that the recent rise in the price of Bitcoin, widely believed to be associated with the impending approval of a Bitcoin ETF, is actually due to the market pricing in a highly inflationary global war.

What’s next: Hayes portends that capital will flow to crypto as the US continues to commit to more open-ended conflicts while simultaneously coping with unhealthy debt levels and “vigilante” bond markets.

Meme Digestif

Thank you for reading! If you enjoyed this post, please share it and spread good news.