By: Jenny Mongan, Blockchain Analyst at Sarson Funds
In the news today and the reason for Bitcoin’s rally this morning (on publication date of this post – 10/16/23) can be attributed to what happened last Friday (on 10/13/23), or more accurately, what didn’t happen.
On Friday, the SEC declined to appeal a court ruling that would allow Greyscale, the sponsor of the largest publicly traded Bitcoin vehicle in the world with more than $30B in assets, to proceed with the company’s stated plans to convert the structure of their investment from a grantor trust into an ETF.
This would be the first spot bitcoin ETF product available in the United States. For more on why this matters, please see our summary of an interview with institutional investor Michael Salyor or click the link below to watch the interview in its entirety through the links below.
Michael Saylor on the Expected Impact of a Bitcoin ETF and FASB accounting Changes
Michael Saylor is of the opinion that the impending spot Bitcoin ETF is a monumental offering poised to inject trillions of dollars into the Bitcoin space. Saylor often regarded as a leading figure in the Bitcoin realm shared his insights on what he believes to be a game-changing catalyst the spot Bitcoin ETF. He believes it’s not a matter of if, but when, a Bitcoin ETF will be approved, with his expectations set for either the fourth quarter of this year or the first quarter of 2024. He also discusses another significant catalyst for Bitcoin with the FASB accounting rules changes for Bitcoin. Read our summary below or listen to the original content here.
Michael Saylor on the Impact of a Bitcoin ETF
According to Saylor, a spot Bitcoin ETF will have a monstrous impact. He believes that an ETF will plug every major bank, every Investment Bank and all the conventional Wall Street players into the asset class immediately.
“…(T)here’s nobody that’s going to give you a loan against Bitcoin so it’s not collateral in the Wall Street system. It’s the second system. So what I’m saying is that Bitcoin, the underlying asset, is impossible to finance. It takes a year to buy. It requires an extreme amount of systems. So there’s a lot of headaches, it’s just not going to happen, and if it does happen you can’t borrow against it.
But the spot Bitcoin ETF means I can have the same thing in one day for free and then if it doubles or triples in value I’ve got $30 million dollars of Bitcoin. I can borrow $15 million dollars against Bitcoin. I’ve already got the loan agreement. I’ve already got the best credit terms. I’ve got a 50 basis point credit spread. So, you see, one of these things is plugged into Wall Street and the other thing is for the Pioneers, right? The early adopters that want to take the arrows in their back, and you know the benefit you get by being an early adopter. You get in before 10x’s like what will happen is at some point, Bitcoin will be $250,000 and it’ll be really easy to buy. It won’t be scary, and it’ll be easy to borrow against.”
Michael Saylor On the impact of FASB Accounting on Bitcoin
Accounting treatment for Bitcoin was the ultra-conservative “indefinite and tangible” accounting prior to this year’s FASB accounting rule change. The new rule will now allow bitcoin to be handled similar to other investments as a conforming FASB asset.
“Before, you had to mark it down to the lowest price it’s ever traded at in the history of the ownership of the asset. So if you’re a CFO in a company like Facebook or Apple or Google or any company where it was well received, where the stock was healthy, you would look at Bitcoin and say it’s too volatile. The other problem with the old accounting was, there’s no distinction between an investment gain and an investment loss.
The challenge for investors is you don’t know how much money the company’s got based on the gap accounting, but you also wouldn’t really understand if the core business was healthy or not healthy.
The volatility of the accounting treatment would obscure the performance of the other business. And then the third problem is you could have a billion dollars of Bitcoin a year ago and it would look like you had $300 million, and this year you could have $10 billion and it would look like you have $300 million. In fact you’ve actually generated $9 billion dollars of capital return in the year and it would look like you returned zero and a [sic] company could actually have a billion and it would look like they have $300 million, so it looks like your company has the same amount of Bitcoin.”
Original content all rights reserved to Daily Dose Crypto. Listen to their original content here. Disclaimer: Sarson Funds and affiliated mangers own and invest in Bitcoin.
Disclosures: Not investment advice. It should be assumed that Sarson Funds or its affiliated managers hold positions in all projects that are discussed. It is not possible to invest in any project directly through Sarson Funds, Inc. or its affiliated managers. Any investment product offered by managers affiliated with Sarson Funds should be assumed to be only available to Accredited Investors and subject to the individual terms and conditions of that offering including but not limited to those eligibility requirements associated with U.S. Securities Regulation D, section 506c. Talk with your financial advisor before making any investment decisions or have them contact Sarson Funds directly at [email protected].