To investors,
A popular bitcoin maximalist talking point for years has been “bitcoin is the only crypto commodity and the rest of the tokens are unregistered securities.” How do I know that has been the talking point? Because it is something that I believed for a long time. It is something that I have heard repeated over and over again by various bitcoin friends.
But over the last 12 months I’ve changed my mind.
It became obvious that assets other than bitcoin would end up on Wall Street. Some of them would be considered a security, but most of them wouldn’t be. The issuers of these assets became too skilled at launching tokens and networks, while making sure to not create a security based on the traditional definition and regulation.
Yesterday we got word from Consensys, one of the most important players in the ethereum ecosystem, that the SEC has closed their investigation into ethereum 2.0.
They wrote:
“Today we’re happy to announce a major win for Ethereum developers, technology providers, and industry participants: the Enforcement Division of the SEC has notified us that it is closing its investigation into Ethereum 2.0. This means that the SEC will not bring charges alleging that sales of ETH are securities transactions.”
This notice from regulators, combined with the incoming approval of the Ether ETFs, confirm that the SEC will not classify ethereum as a security. The CFTC has already classified the asset as a commodity and it appears that will be the agreed upon status moving forward.
There will be many people in the bitcoin community who ignore these data points. This will be a mistake. When the facts change, you must change your mind. It is a sign of intelligence when you do.
Ethereum’s classification as a commodity will have far-reaching implications in the market. As I wrote to you all on June 7th in my letter titled Altcoins Are Coming To Wall Street:
“Capital allocators have a lot of options of where to put their money. Stocks. Bonds. Currencies. Real estate. Commodities. Crypto. The list goes on and on.
But crypto appears to provide more risk than most asset classes, which in turn means that a higher potential return is present. You get paid for the risk you take. At least that is the way a market should work.
Now here is the part that may seem counterintuitive — Wall Street loves risk.
Many people believe the suits are risk-adverse. They aren’t smart. Wall Street doesn’t know what is going on. But that is wrong.
Wall Street has created the greatest casino in history. Every day trillions of dollars are wagered in the market based on risk-reward. The more risk that is present, the more someone on Wall Street will seek out the opportunity.”
The altcoin market provides volatility and risk. Wall Street is salivating over the opportunity to allocate to this part of the market. Now that ethereum is a commodity, I would expect regulatory clarity on a number of other assets in the next 12 months.
As we get that regulatory clarity, capital will flow. ETFs will be approved. Retail will keep buying. Institutions will get in the game. The market caps of many assets will grow to be much larger than we ever imagined.
And many of the altcoins will also be worth zero. They will end in ruin and tears.
But this is how markets work. A truly free market allows participants to allocate their private capital how they see fit. The rewards go to those who are right and the losses gravitate to those who are wrong.
Rather than debate which assets will win or lose, we can let the market be the referee. There is something beautiful in that.
Hope you all have a great day. I’ll talk to everyone tomorrow.
-Anthony Pompliano
Phil Rosen, the Co-Founder of Opening Bell Daily, interviews Anthony Pompliano. Topics include bitcoin, President Trump's recent support of the industry, interest rates, financial media, and more.
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Anthony Pompliano on Bitcoin, Bull Markets, Interest Rates, and the Presidential Race
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