At a time when global risk assets are bleeding due to an unholy convergence of China’s epic economic slowdown and resurgent inflation expectations across key markets on the back of crude oil’s inexorable rise, playing an important role in ramping up the yields in the US, Bitcoin tumbled to multi-month lows yesterday as an article by the Wall Street Journal was wrongly interpreted by trigger-happy traders. Of course, a key ruling that can shape the future of the cryptocurrency industry in the US is also adding to this recent bout of volatility.
The FUD Around Bitcoin: A Dime a Dozen
Wall Street Journal published an article on SpaceX yesterday. Unfortunately, the post’s Bitcoin-focused content was wrongly interpreted by a host of traders, not helped by the relatively vague language employed within the article. The passage read:
“The documents also show SpaceX wrote down the value of bitcoin it owns by a total of $373 million last year and in 2021 and has sold the cryptocurrency. Tesla has taken a similar approach with its bitcoin holdings.”
BREAKING: Elon Musk’s SpaceX sold all its $373 million #bitcoin - WSJ
— Bitcoin Magazine (@BitcoinMagazine) August 17, 2023
Some traders interpreted this passage as an indication that SpaceX had sold the entirety of its Bitcoin stash. However, a careful perusal of the passage reveals that SpaceX marked down the value of its Bitcoin stash in 2021 and 2022, having sold a part of the original hoard. The passage never says that SpaceX no longer holds any Bitcoin. What’s more, this information pertains to 2022 and, as such, should have no bearing on the current pricing environment.
We are unable to confirm reports that SpaceX sold $373 Million worth of #Bitcoin
The report by WSJ is unclear and states, "SpaceX wrote down the value of #Bitcoin it owns by a total of $373 million last year and in 2021 and has sold the cryptocurrency."
As of now, there is no… pic.twitter.com/75EcdLzBzS
— Watcher.Guru (@WatcherGuru) August 17, 2023
While some X accounts tried to curtail the damage, the FUD did have a significant impact, prompting Bitcoin to fall to the $25,000 price handle.
Grayscale’s Lawsuit Against the SEC
Our readers would remember that Grayscale has been diligently trying to convert its Bitcoin Trust into a Spot ETF for quite some time. A spot Bitcoin ETF will make it extremely convenient for investors to acquire exposure to Bitcoin without the pitfalls associated with futures-based ETFs. It would also rectify the recurring deviation of the trust’s NAV from Bitcoin’s price, prompted by the fact that the trust is not allowed to redeem units. This means that when the trust’s NAV trades at a discount to Bitcoin’s spot price due to an onslaught of selling pressure, the trust has no mechanism to restore convergence with Bitcoin.
A few months back, the SEC rejected Grayscale’s application to convert its Bitcoin Trust into a spot ETF, prompting the firm to mount a lawsuit by alleging unfair treatment.
March '21/'22 cases with decisions within 160 days of oral: 30/32 (94%)
Days since Grayscale (March '23) oral: 160 days
Why should we expect August? Because law clerks for DC generally cycle in/out this month, so judges aim to clear prior caseload before the new guard arrives. https://t.co/vVj0dHus90
— Scott Johnsson (@SGJohnsson) August 14, 2023
Interestingly, the ruling on this lawsuit is expected within August, as explained in the above tweet. This is because the DC Circuit has statistically delivered a ruling within 160 days of the conclusion of oral arguments. Moreover, August also marks the time when law clerks cycle in/out of the circuit, giving an impetus to the judges to clear the previous caseload.
Looks like no Grayscale decision today... We now are past the 160 day norm. Friday 11am is next batch. Stay tuned. pic.twitter.com/KFCU7TobtI
— Eric Balchunas (@EricBalchunas) August 15, 2023
After last Tuesday, a ruling was expected this Friday at 11:00 a.m. So far, however, the much-anticipated ruling has not materialized. The next window now opens on the 22nd of August, corresponding to a Tuesday.
There are hopes that a spot Bitcoin ETF will materialize quite soon. While rejecting BlackRock’s spot Bitcoin ETF application a few weeks back, the SEC went a step further and highlighted the precise lacunae that have been hindering the process, including the absence of a “surveillance-sharing agreement” with eligible spot Bitcoin exchanges. This has opened the doors for applicants to remove the highlighted deficiencies and refile their applications. Accordingly, almost all contestants have refiled their applications.
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