“That’s Our 2 Satoshis” — Gensler (sigh)

What Happened This Week in the Digital Assets Markets?
Week-over-Week Price Changes (as of Sunday, 09/11/22)

Week over week digital asset price change

Source: TradingView, CNBC, Bloomberg, Messari

Before the Big Events Come This Week

Digital assets broadly moved higher last week, but this time, Bitcoin joined the rally as well. While neither BTC nor ETH has been the story in digital assets the past few weeks (instead, the stories have been bankruptcies, DAO liquidations, governance proposals, blockchain reorgs, and a flurry of news and conferences), it is notable that the ETH/BTC ratio fell sharply last week after rallying for most of the past three months. Bitcoin finally caught a bid for various reasons—most notably, the U.S. dollar retreated after the ECB raised rates 75 bps, and news that Microstrategy (MSTR) is considering yet another BTC purchase financed by selling stock.

ETH BTC Market Trend

Source: FTX

However, all of last week’s moves will likely prove meaningless ahead of the big showdown this week. A triple whammy is set to hit the market, which could cause explosive price action:

On September 13th, the Bureau of Labor Statistics will issue the August CPI report
The Ethereum 2.0 merge is likely to be completed sometime around September 14th
September 19th is likely to be an important day in terms of finally getting some clarity in the Ripple versus SEC case

The most bullish case would be:

A decline in the month-over-month CPI reading (which is starting to become expected given how fast commodities, house prices, used cars, and other indicators have moved lower)
A very smooth Ethereum merge with no hiccups (our base case assumption)
A decisive advance in Ripple’s already expected win in the court case against the SEC (toss up)

The bear case would be the opposite: higher CPI m-o-m, an SEC “win,” and problems with the ETH merge.

It’s notable that the options market does not seem to be fully pricing in the potential fireworks show.

Source: Skew

Gensler and His Crusade

Speaking of the SEC, we’ve seen quite a few headlines from Gary Gensler over the past few years, usually striking a similar tone (the following is paraphrased):

“All tokens are securities.”

“The SEC should be the agency that regulates digital assets.”

“The digital assets market needs a ‘cop on the beat’ to keep investors safe.”

Typically, these soundbites have led to negative price action. But last week, the market completely ignored Gensler’s latest speech.

I recommend reading Matt Levine from Bloomberg’s assessment of the SEC, Gensler, and digital assets. It is probably the most straightforward, unbiased opinion of where the SEC is right, and where they are not. If you’re short on time, here are my favorites from Levine:

Matt Levine Bloomberg’s assessment of the SEC

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And That’s Our Two Satoshis!
Thanks for reading everyone!
Questions or comments, just let us know.

The Arca Portfolio Management Team

Jeff Dorman, CFA - Chief Investment Officer

Katie Talati - Director of Research

Hassan Bassiri, CFA - Portfolio Manager

Sasha Fleyshman - Portfolio Manager

Alex Woodard - Research Analyst

Nick Hotz, CFA - Research Analyst

Bodhi Pinker- Research Analyst

Wes Hansen - Director of Trading & Operations

Kyle Doane - Trader

David Nage - Principal, Venture Investing

Michael Dershewitz - Principal, Venture Investing

Michal Benedykcinski - Research Analyst

Andrew Masotti - Trading Operations

Topher Macpherson - Trading Operations

To learn more or talk to us about investing in digital assets and cryptocurrency

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