8/31/23 Roundup

Onramp Weekly Roundup

Hi all,

This is Dylan LeClair, presenting this week’s Onramp Weekly Roundup.

Before we get started… If you’re a HNWI or Institution looking for the best way to get exposure to bitcoin, Onramp Bitcoin could be the right fit for you – schedule a chat with us to discuss your situation & needs.

And now, here’s the weekly roundup…

Grayscale's Legal Victory

Grayscale Investments LLC recently clinched a notable victory against the U.S. Securities and Exchange Commission (SEC), successfully challenging the regulator’s decision that had previously approved only futures-based ETFs. This legal triumph upends the SEC’s stance, which had been championed by its Chair Gary Gensler, on limiting the industry to futures-based ETFs, supposedly for safety reasons.

Grayscale’s central argument—that the justifications for disapproving a spot-based bitcoin ETF should not differ from those for a futures-based ETF, which the SEC approved in late 2021—offers a substantial challenge to the SEC’s position. For Grayscale, the possibility of launching a bitcoin ETF addresses several crucial issues. The most immediate of these is mitigating a persistent liquidity problem associated with its closed-end trust structure that frequently led to its shares trading at steep discounts to the underlying bitcoin value.

More broadly, a spot-based bitcoin ETF could catalyze a significant influx of investment into bitcoin.

The drama has cast a spotlight on the Grayscale Bitcoin Trust ($GBTC), an entity with a commanding hold of over 600,000 BTC. Its considerable market influence has proven to be a double-edged sword. While it propelled the bull market with its mechanisms that encouraged massive capital inflows and created lucrative bitcoin “yield products,” it turned into a hindrance when its shares began trading at a discount to Net Asset Value (NAV). This has had repercussions across the market, contributing to the collapse of various financial entities that were intertwined with the trust.

The events highlight a critical lesson for all market stakeholders and regulatory bodies: financial products that fail to make full use of bitcoin’s intrinsic attributes can inadvertently expose investors to unforeseen risks and offer less-than-optimal investment opportunities. With Grayscale’s recent legal win, we once again highlight the availability of financial products purpose built to utilize bitcoin’s native features, offering customers better assurances while exposing the market to less systemic risk in the process.

Labor Market Softening

The U.S. job market has signaled a noticeable decrease in demand for labor, reflecting an alignment with the Federal Reserve’s strategic efforts to combat inflation. Job openings fell to 8.83 million in July, marking a more than two-year low, according to the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey (JOLTS). This dip in available positions comes as part of a broader trend, having marked the sixth decline in job openings in the past seven months. Additionally, the “quits rate,” which gauges the percentage of workers voluntarily leaving their jobs, declined to 2.3%, its lowest point since early 2021. 

These developments suggest a tempering of labor demand, with ripple effects across sectors such as professional services, health care, and government. This cooling labor market appears to serve the Federal Reserve’s objectives well. The rationale behind this is straightforward: fewer job vacancies, coupled with a more moderate pace of wage growth, provide a counterbalance to inflationary pressures. Jerome Powell, the Fed Chair, recently intimated that a more relaxed labor market could facilitate a decrease in the current inflation rate. Consequently, the contraction in the labor market should not necessarily be perceived as a harbinger of economic downturn (yet at least), but rather as a deliberate measure to steer inflation towards a more manageable trajectory.

Given the Federal Reserve’s track record of overshooting its policy objectives, such as its late 2020 call for inflation to rise dramatically—only to subsequently lose grip on how sharply inflation actually spiked—one must question the full scope of their understanding of second and third order effects. Fed Chair Jerome Powell said just three years ago,

“Many find it counterintuitive that the Fed would want to push up inflation… However, inflation that is persistently too low can pose serious risks to the economy.”

Now, with the Fed announcing plans to tighten monetary policy until the labor market shows signs of weakness, aiming to curb inflation, it remains to be seen whether they have a nuanced grasp of the ensuing ripple effects this time around.

Podcast of the Week

E014: Why Bitcoin is the Ultimate Form of Value Investing with Brian Cubellis, from The Last Trade

This week’s episode of The Last Trade was filmed during BitBlockBoom in Austin, TX.  Onramp’s newest hire, Brian Cubellis, joined hosts Marty Bent and Michael Tanguma in person, along with the disembodied head of Jesse Myers.  The conversation ranged from Brian’s 8 years on Wall Street to his rabbit hole journey into digital assets, working for a year at Coinbase, and what he learned there that turned him into a high conviction Bitcoin-only advocate. The overarching framework that tied these experiences together for Brian is his realization that Bitcoin is the ultimate form of value investing.

Check out the full episode here.

Closing Note

Wrapping up this week’s digest, Onramp Bitcoin invites you to explore our offerings on our website.

With an industry-leading multi-party custody solution, Onramp allows Bitcoin withdrawals without triggering a taxable event. Onramp stands as an optimal solution for HNWI and institutions seeking Bitcoin exposure prior to transitioning to self-custody.

If Onramp’s offerings align with your needs, or those of someone you know, feel free to schedule a chat with us here.

Onward and Upward,

Dylan LeClair