NCI: Ethereum ETF: Bananas or Banana Zone?

Ram Ahluwalia & Quinn Thompson, Dimitrios Kavvathas, Nick Rygiel

Thank you for Listening this Episode!

Support our podcast by spreading the word to new listeners. We deeply appreciate your support!

Episode Description

On today's episode, we're diving deep into the hot topic of Ethereum ETFs. Has the SEC finally caved? We'll break down what it means for you and what's next in crypto.

Episode Transcript

[00:00:00] Welcome to Non Consensus Investing. I'm Ram Ahluwalia, your host and CIO at Lumida Wealth, where we specialize in the craft of alternative investments. At Lumida, we help guide clients through the intricacies of managing substantial wealth so they don't have to shoulder the burden alone. Through this podcast, we draw back the curtain to reveal the strategies employed by the best in the business for their high net worth clients so that you too can invest beyond the ordinary.


 All right, we are live special edition of Lumida non consensus investing. I'm really pleased to be joined by a professional money managers. We've got Quinn Thompson, who is the founder and CIO of Lekker Capital. It's a new crypto hedge fund. Demetrios who is from Ithaca Protocol, who's a crypto options trader and Nick Rigel.

Who is from Ironclad Financial ex Merrill crypto TradFi convert, much like myself. Look, the topic here is Ethereum. [00:01:00] Is it bananas or are we going to the banana space? So there's a lot we want to get into. We want to get into where we've been, where we are now where we're going and really excited to dig right in.

I'm going to share my screen here. Which shows the Coindesk if ETHE index and you can see that we've had, quite a rally and then a pullback in the last two days on the announcement that, not the announcement, on the speculation, I should say from Bloomberg, particularly James and Eric over there, who've done a great job, covering this, that the SEC will imminently approve the Ethereum spot ETF without a staking feature.

So the market is anticipating that and let's get into it. Quinn. Yeah. Great to be here. Thanks. Thanks for having me on. Yeah, it's been a, it's been an interesting few days, I think, my kind of take coming into this situation, obviously had no idea that this would come this week and it's quite [00:02:00] the pivot.

From my vantage point at Lekker, we focus a lot on the macro environment and base our broader investment strategy around that and then also a number of micro components and really coming into this week. And last week you had I'd say everybody on one side of the boat in terms of positioned hedging their ETH and over allocated to Bitcoin and Solana relative to where maybe ideal portfolio would be if there's an ETH ETF and ETH was left in this middle ground for the last six months ever since the run started on the rumors of the Bitcoin ETF.

It's that between Bitcoin getting the institutional flows and Solana getting a lot of the new money is. is where a lot of the activities occurred. And we've seen obviously a huge re rating overnight on the ETH, BTC and other relative value ratios. But to me, there's I think there's still a lot of room here to go.

I think people, price drives narrative and then narrative drives price and price goes again. So I think there'll be some digestion of this. And what I'm seeing is across a broader supportive environment with rates [00:03:00] lower, there's. It's obviously still inflation but the Fed has signaled, unlike 2022 they don't plan on hiking, they actually plan on easing, they grow back their quantitative tapering and a lot of interesting signals lining up here for a pretty supportive market for crypto.

Great. And there's also a post that I included from you in the thread. So folks can take a look at that for more here. You also had a great interview, I thought. Or you, your podcast on the margin this past weekend. So I highly recommend folks have a listen to that. Dimitrios, what's your perspective?

And these news are huge. And I associated alongside the. Political developments over the last 24 48 hours. As was being discussed, we have SAB 1 21 not to be vetoed perhaps. We have FIT we have the FDIC resignation of the chairman, which of course is for different reasons, but I don't think it's it should be somehow seen as a [00:04:00] loss for the war infraction within the Democratic party and it's strong will hold on that.

Perspective of how financial sector would be regulated going over the last few years and going forward. As always, market, the market cannot absorb this quantity of news as quickly as one would being knee deep on crypto Twitter all the time. I was, I had tweeted, one of the tweets I sent earlier today was that in the various market roundups I received from investment banks, And no one actually mentioned it, so maybe they will mention it.

Today, but again, I'm based in Hong Kong, right? So it's late my day. So at time, neither in the morning or the afternoon, it never really showed up in any of the roundups. That cannot in any way imply that the news can be so quickly priced especially us having been into this, being in the space as active as [00:05:00] actively as we are.

We can see a lot more the broader repercussions about what happened rather than just the optical, there is an ECTF coming up even more so because I'm in Hong Kong where actually we have an ECTF. Or for the last few weeks. And it hasn't really made any difference, but it's a very different story.

And I've got on the screen here is a tweet you had on May 10th. You talk about peak season for ETH negativity. You go on and you make your bull case here. Great timing to you as well. And on, on ETH, it's quite interesting. I'm, we're, we all share a telegram group. And it was like in the last half hour or so, the news starts hitting.

And if you look at just what happened to Ethereum Nick, you want to walk us through, what you saw yesterday and other thoughts. Yeah I think first, my, my viewpoint with basically everyone that I talked to, Ethereum was just relegated to a, [00:06:00] Next year type of mindset.

So I think people that were holding ETHE. We still have a preference of many folks that might be holding at a qualified custodian, they're not really going on chain. And I think their motivation was. All right, I might own ETHE for the discount and I might have my positions in a self custody wallet or on a exchange, but let's focus on Solana or let's focus on what's happening with Bitcoin or the developing L2.

So I think it was just more of an outside out of mind and everyone just assumed based off so much toxicity. From a regulatory standpoint that this is, we wouldn't really see any movement here before the election. And then when this came out of left field, then it was a frenzy of dusting off the Ethereum playbook, if you will.

So we, we saw that on chain. We saw flows going back. We see the total the total volume locks on mainnet and arbitrary base for example, just going up. And we're just starting to see that, that, that interest peak on what do we do [00:07:00] next? What's the next iterator. Iteration. Exactly. And the political angle to this is interesting, right?

So we saw the FDIC chair, Marty Gruberg, who nominally resigned on account of sexual harassment. Issues that have pervaded the FDIC now those issues resurfaced a year and a half ago, so maybe the government's just a bit slow at holding people accountable, or, maybe this is a a repositioning of, I don't know.

Democrats to participate in a new theme. Quinn what's your take? I saw you smiling there. It looks like you got a view. Yeah. It just, that's the pace of government. So the funny thing is, it's no matter how absurd you cut, like it actually could have taken, but no, I do think it's a broader theme and to.

To Dimitri's point about about the market's time to react to this. It is just such 180 monumental news in a number of respects that, that it is hard for the market to digest. You look at I think the implications for this stem way [00:08:00] beyond just Ethereum but backing up to the fact pattern, it started with the SAB, 1 21 bill, getting through the Senate.

A large number of Democrats, including Chuck Schumer New York very liberal crossing the aisle here, inciting Republicans, already putting Biden and Warren Kemp in a very tough spot, anti crypto stance you mix that then with the, this news and it's pretty obvious, like what, what's going on here and then the FDIC there is sprinkled on top and all these, the FDIC chair that's stepping down is.

He led the choke point 2. 0 campaign against, crypto and banking mixing together. You, obviously this reflects very poorly on Gary Gensler who, you know, supposedly from even staffers within that CC found this to be a very surprising reversal. And so it's just a, it's just really unfortunate in terms of it's really just to win an election, that they're coming to the table and not actually analyzing these rules and regulations on the merit.

But, that's how you get things done in this [00:09:00] country and in politics and it's, definitely a result of Trump positioning as pro crypto and Biden falling behind in, in the polls. When you read through this news and just the aggregation of all of it together, you see a much more favorable regulatory environment across the board for crypto.

And so this means stable coin bill is going to get passed. There's obviously outstanding litigation against it. A number of crypto entities, in the public realm, you have Coinbase and Robinhood, two, two very large players in the retail and institutional on Coinbase side trading. And this should benefit everybody who's touching the space and allows at least a pathway to, to proper regulation.

I think, Arthur I I said this in our chat, I was like, you gave me a blank sheet of paper and said, write up some of the most bullish things you could think that would happen in the next month. This gets pretty, pretty close. Absolutely. The only thing further I think you could think is like fully dropping all the losses, but that's never going to happen.

So I think it's huge for the industry. Right on. Take a look at this post by [00:10:00] Avichal from Electric Capital, a well known successful VC. And. He's responding to the claim that that the DEMs are relying on crypto. He's got a different take. He says. Hey, these sorts of takes are bad and wrong. When Trump is quote for something, Dems are glad to be against.

Dems are moving on crypto because of a realignment of power inside the Democratic Party. In 2020, Biden needed the far left to win. In 2024, he needs the moderate left to win. So there's story number one is that Ryan Selkis is there with Donald Trump. What, two weekends ago on stage, Trump is embracing crypto that goes viral, a couple million views.

And then that forced the Dems to run towards this policy issue to capture, the marginal vote in these swing States. Avicii is saying something different. He's saying actually the factions in [00:11:00] the democratic party are realigning. And there's some evidence for that in that, you do have folks that are under 45 in Congress that are supportive.

of crypto legislation and also Senator Warren's studio appointees in the FDIC chair are now sidelined and it looks inevitable that Gensler will be leaving. Any views on, which of those two stories is accurate?

I think it's more RFK Jr. Impact as well, right? Especially since he presented himself as. There are two crypto candidates, right? There RFK, and one of them is clearly aligning themselves with grabbing, being the one that wants to take over the Democrat leaning, let's frankly call it the female aspect, right?

Being so clear about his abortion views. I think it's more like trying to at least it used the the impact on the men's side, which at this point would have obviously been lost to Trump. It's, let's call it [00:12:00] triangulation, because I think RFK is actually going to play a very important role in there.

Again, I'm not really saying anything insightful here, but I think the tweet by Abhishek should be read a little bit more he should have put RFK in the mix, because I think it's reasonably important. In terms of how it plays both with crypto and for the election in general. I think this tweet could have merit to it, but I think it ignores the elephant in the room that why would these, let's say they are moving just on their own, why would they do that now?