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💬 BlackRock has entered the CHAT

AND a Crypto + AI wet dream for VCs.
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Aakash Athawasya
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Tryna write some stuff @doodhwaladaily (will buy you milk if you ask nicely)
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💬 BlackRock has entered the CHAT

AND a Crypto + AI wet dream for VCs.

Gm, it’s a Friday ya’ll. You know what that means? Swap that coffee with a…er…more colorful drink. 

Perhaps one that comes with one of those tiny umbrellas. 🍸

“Insanity is doing the same thing over and over and expecting different results.”

That’s a quote attributed to Einstein, I guess.

It’s also the most overused quote on the internet. But it’s a quote asset managers should write on the walls of their corner offices. Why? Because they’re doing it again.

ANOTHER asset manager has filed for a Bitcoin investment product that has STILL not been approved by the US Securities and Exchange Commission (SEC). But this applicant is bigger than any other before it and perhaps even after it.

Speaking of the SEC, they’re not having a good time with crypto right now. In the past month, the SEC has:

  • sued 2 crypto exchanges

  • labelled multiple cryptos – “securities”

  • and said the US doesn’t need any more digital currency

Yet, here we are talking about a Bitcoin ETF proposal before the SEC. This one might have a strong chance of getting the ✅ tho. Read on to find out why and how it’s structured.

Alright, let’s get into it:

  • 🔥 The Bitcoin ETF Breakdown: How BlackRock might pull it off

  • 💰 $43 million raised: If you’re a VC, you’re gonna love this

  • 📈 The Flippening [finally!]: But Bitcoin is not involved

  • 🐘 Change it Gary: House Republicans call for a BIG change

✅ The World’s Biggest Asset Manager Wants You To Buy Bitcoin

Bitcoin and BlackRock.

That’s two terms that don’t often go together. Kinda like a McDonald's Pizza or a Subway Burger. I mean, they’re all fast food, but one is NOT like the other.

That’s why it came as a BIG surprise when BlackRock filed for a Bitcoin exchange-traded fund (or ETF).

That ☝️ isn’t actually the full headline. This is 👇

BlackRock’s ETF provider – iShares – filed paperwork with the Securities and Exchange Commission (the SEC) for a spot Bitcoin ETF.

The 111-page report was filed by the Nasdaq with the SEC on June 15 to list iShares Bitcoin Trust’s Bitcoin ETF. And it contained a lot of interesting details on how BlackRock plans to structure the ETF as well as some spicy takes on other Bitcoin ETFs approved by the SEC in the past. Hint: BlackRock ain’t pulling any punches.

But before the drama let’s look at how this product is structured.

An important point to note here is that – BlackRock (through iShares) is proposing a Bitcoin spot ETF i.e. an ETF that calculates the value of BTC across “major spot exchanges.”

This ☝️ is called the – CF Benchmarks Index – which will determine the “U.S. dollar price of Bitcoin” based on Bitcoin’s spot price on the following exchanges:

  • itBit

  • LMAX

  • Gemini

  • Kraken

  • Bitstamp

  • Coinbase

Through the ETF, investors can invest in Bitcoin’s price action without actually buying Bitcoin. As BlackRock’s proposal before the SEC puts it:

“The Trust is intended to provide a way for Shareholders to obtain exposure to bitcoin by investing in the Shares rather than by acquiring, holding and trading bitcoin directly on a peer-to-peer or other basis or via a digital asset exchange.”

BlackRock is doing nothing here. It’s mainly acting as the intermediary. And of course, the face, the headline maker, and the political might to get this okay-ed by the SEC.

The actual transactions are conducted by 2 entities:

  • Coinbase Custody: Coinbase’s institutional custodial arm is the “Bitcoin Custodian” as per the proposal and will hold all the Bitcoin to back the ETF.

  • Bank of New York Mellon: BNY Mellon is the “Cash Custodian” to hold the cash of the investors investing in the Bitcoin ETF

The broad structure is nothing new.

In the past, several asset managers (including Bitwise, Grayscale, and VanEck) have proposed similar structures for their respective Bitcoin ETFs, only to be rejected by the SEC.

What is different is the SSA – the surveillance sharing agreement – in the BlackRock agreement. This SSA states that iShares will bring in Nasdaq to share market data and prevent market manipulation. Tbh this is the SEC’s biggest qualm – that the Bitcoin ETF can be gamed by a big enough whale leaving investors adversely affected.

The broad offering is nothing new either. The SEC has approved at least 4 Bitcoin Futures ETFs, including one that is short Bitcoin.

BlackRock’s proposal calls the Bitcoin Futures ETF “sub-optimal” especially for long-term customers because it is:

  • Inaccurate

  • Costly to investors

  • Prone to manipulation

Based on this ☝️, BlackRock asserted that the SEC approving a Bitcoin Futures ETF but holding its breath on a spot ETF was an “odd tautological truth” and “arbitrary and capricious.” You know you’re a boomer if your go-to insult has the word “tautological” or “capricious” in it.

Well, there ain’t no word from the SEC or its chairman Gary Gensler on BlackRock’s Bitcoin ETF. Right now, they’ve got bigger fish to fry with – Binance. The SEC charged Binance with mishandling customer funds and even wanted to freeze the biggest crypto exchange’s US assets. We covered this in detail last week.

Do you think BlackRock’s Bitcoin spot ETF proposal will go through? More importantly is it a BIG DEAL? Let us know by replying. 📩 

🪄 FUNDING ALERT: Blockchain and AI protocol raises $43 million

AI.

Blockchain.

Machine Learning.

If you’re a VC, these words just made you go. 😍

That’s what Gensyn, a computing resources platform, did to a bunch of VCs, including Andreessen Horowitz (or a16z). This week Gensyn raised $43 million in a Series A fundraise. Other investors include – CoinFund, Canonical Crypto, Protocol Labs, and Eden Block, among others.

But Gensyn is not your average crypto or AI company. It’s both. Well kinda.

Gensyn is a layer-1 protocol for computational resources. Ethereum and Solana are also layer-1 blockchains. But they perform simple tasks through decentralized smart contract transactions. Gensysn is a computational layer that rewards participants for giving computational resources to the network to perform machine learning tasks. These tasks require far more computing than public blockchains as we know them. This is, right now, trustless but not tokenless.

Fun Fact: This is a16z’s first investment since expanding its base outside the US, to London, England. Gensysn is also based out of London.

📈 Chart of the week: The real Flippening is this 🤏 close

In 2022, The Flippening was Ethereum flipping Bitcoin. It didn’t happen.

In 2023, The Flippening is when ETH staked on Ethereum 2.0 flips ETH held on exchanges. And it’s 🤏 close.

How much is 🤏 exactly?

About 1.4 million ETH worth $2.3 billion.

Right now, there are:

  • 24.3 million ETH held on exchanges (down 17% in 2023)

  • 22.9 million ETH staked on Ethereum 2.0 (up 34% in 2023)

The difference is 1.4 million ETH. That’s how close we are to The Flippening of staked ETH > ETH on exchanges.

🤣 Meme Of The Week

👀 What else we Grittin’ On?

🔥 FIRED. Binance US fires 50 people after the SEC charged the exchange with violating securities laws.

💀 DEAD. Texas state regulators have said that Abra, a crypto lender, has been insolvent since March 2023.

❌ BAN. The State of New York bans crypto exchange CoinEx and seizes $1.7 million in funds for failing to register as a securities and commodities broker.

✋ OUT. The House of Financial Services Committee’s Republicans pens a letter to SEC Chair Gary Gensler to amend the definition of an “exchange.”

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