Joe Saluzzi, co-founder and co-head of Themis Trading, was a supporter of Gary Gensler’s until the Securities and Exchange Commission (SEC) chairman “gave in” to the recent approval of spot Bitcoin ETFs. Saluzzi, who co-wrote “Broken Markets”, said Gary Gensler’s and SEC “overreached” and faced “the crypto machine” that was ready to challenge his regulation proposals in court. This put too much pressure on the agency, and Gary Gensler’seventually had to back down on the approvals of the ETFs – “he gave in to that” and “he should’ve stood up to them”, Saluzzi said.
Gary Gensler’s Disappointing Decision on Bitcoin ETFs
Saluzzi believes that cryptocurrency owners will be the “losers”, as Bitcoin (CRYPTO: BTC) dropped 15% from its approval highs. “The BlackRocks of the world are going to rake in a lot of money, they’re out there smiling”, Saluzzi said. He explained that the Bitcoin ETFs would create more demand for the underlying futures contracts, which would drive up the price of Bitcoin and benefit the large institutions that hold them.
However, the retail investors who buy the ETFs would face high fees, tracking errors, and liquidity risks, as well as the volatility and unpredictability of the cryptocurrency market. Saluzzi said that the Bitcoin ETFs were not suitable for long-term investors, but rather for speculators and traders who want to gamble on the price movements of Bitcoin.
The SEC’s Huge Blunder Under Gary Gensler’s Leadership
“The biggest blunder they [SEC] made was approving the Bitcoin futures ETF, that opened the door for this”, Saluzzi added.
This becomes especially relevant as the SEC is about to make a similar decision regarding the approval of spot Ethereum (CRYPTO: ETH) ETFs. The legal situation for these Ethereum ETFs is somewhat comparable, as Ethereum futures ETFs have already been approved for trading.
However, in the press release that announced the approval of the Bitcoin ETF, Gary Gensler’s stressed that the decision “is not a stamp of approval” for Bitcoin, highlighting Bitcoin’s unique status as a digital commodity – a distinction Gensler has not made for Ethereum.
Saluzzi said that Gensler’s statement was contradictory and hypocritical, as he was effectively endorsing Bitcoin by allowing the ETFs to trade on the stock market. He said that Gensler was trying to appease both the crypto enthusiasts and the regulators, but ended up pleasing neither.
He said that Gary Gensler’s should have stuck to his original stance of requiring more oversight and transparency for the cryptocurrency industry, instead of giving in to the pressure and lobbying from the crypto advocates and the financial firms. He said that Gary Gensler’s decision was a “huge mistake” that would have negative consequences for the investors and the market.
The Dangers of Crypto ETFs That Gary Gensler’s Ignored
“I have no issue with crypto”, Saluzzi said, but the ETF “format” gives Bitcoin a “seal of legitimacy” that is, in his opinion, undeserved.
Cryptocurrency markets still lack the necessary “oversight” that the SEC demanded but still “gave in on”, Saluzzi added.
The approval unleashes a flood of cryptocurrency-related financial products, which already began with a BlackRock application for options trading on its iShares Bitcoin Trust (NASDAQ: IBIT) shares.
“When will the 5X Dogecoin ETF be added to a long-term portfolio?”, Saluzzi asked sarcastically.
Echoing Jamie Dimon’s preference for stocks over cryptocurrencies, Saluzzi called more obscure leveraged ETFs “gambling”, saying “that is not what the stock market is for”.
Saluzzi said that crypto ETFs pose many risks and challenges for the investors and the regulators, such as:
- The lack of clear and consistent rules and standards for the cryptocurrency industry, which makes it vulnerable to fraud, manipulation, hacking, and cyberattacks.
- The difficulty of verifying the accuracy and reliability of the data and information provided by the cryptocurrency platforms, exchanges, and custodians, which may not be audited or regulated by any authority.
- The uncertainty and inconsistency of the tax treatment and reporting requirements for the cryptocurrency transactions and holdings, which may vary by jurisdiction and change over time.
- The complexity and volatility of the cryptocurrency market, which may result in significant price fluctuations, liquidity issues, and market disruptions.
- The environmental and social impact of the cryptocurrency mining and transactions, which may consume a lot of energy and resources, and contribute to greenhouse gas emissions and climate change.
Saluzzi said that crypto ETFs would not solve these problems, but rather amplify them and expose more investors to them. He said that crypto ETFs would not provide any real value or innovation to the market, but rather create more speculation and instability.
The Response of Vanguard to Gary Gensler’s Bitcoin ETFs
Asked about the backlash Vanguard received for not offering the Bitcoin ETFs for trading, Saluzzi said the company has every right to do that. “It is ridiculous” that some people criticized Vanguard over this, he said. He praised Vanguard for being prudent and responsible, and for putting the interests of its clients first. He said that Vanguard was one of the few companies that had the courage and integrity to resist the hype and pressure of the Bitcoin ETFs, and to focus on its core values and principles.
Saluzzi said that Vanguard’s decision was consistent with its philosophy and mission of providing low-cost, diversified, and long-term investment products and services to its clients. He said that Vanguard was not against innovation or technology, but rather against speculation and gambling. He said that Vanguard was not missing out on anything by not offering the Bitcoin ETFs, but rather avoiding a lot of headaches and troubles. He said that Vanguard’s clients should be grateful and loyal to the company, and not be swayed by the allure and temptation of the Bitcoin ETFs.
The Fed’s Plan for 2024 and How It Differs from Gary Gensler’s Approach
Inspired by the NFL PLayoffs Championship Games, Saluzzi used a fitting metaphor to describe the Federal Reserve’s situation going into 2024: the Fed is “winning” and doesn’t need to use its “timeouts” – meaning rate cuts – too soon. But it’s still good to have them “in their pocket”.
In other words, Saluzzi expects rate cuts to start only in May, given the economy’s strength.
Saluzzi said that the Fed’s strategy was different from Gary Gensler’s approach, as the Fed was more cautious and patient, and not easily influenced by the external factors and pressures. He said that the Fed was aware of the risks and challenges posed by the inflation, the pandemic, the supply chain disruptions, and the geopolitical tensions, but also confident of the resilience and recovery of the economy.
He said that the Fed was not in a hurry to tighten its monetary policy, but rather willing to wait and see how the data and the situation evolve. He said that the Fed was not afraid to use its tools and instruments when necessary, but also careful not to overreact or underreact. He said that the Fed’s plan was more balanced and flexible, and more suitable for the current and future conditions of the market.
Conclusion
Bitcoin ETFs still seem to be somewhat distant from the mainstream adoption narrative that industry experts like to use, although, they’re on everyone’s mind. However, not everyone is convinced or impressed by the Bitcoin ETFs, as some experts and critics have raised serious concerns and objections about their legitimacy, suitability, and impact.
Gary Gensler’s, the SEC chairman, has been at the center of the controversy and debate over the Bitcoin ETFs, as he has made some controversial and contradictory decisions and statements regarding their approval and regulation. His actions and inactions have been met with mixed reactions and responses from the market participants and observers, who have different views and expectations of his role and responsibility. The Bitcoin ETFs saga is not over yet, as more developments and challenges are expected to emerge in the near future.