Five Things to Know in Crypto This Week: DOGE Part Ways with XRP and BTC
- Dogecoin hits a high of $0.0877 as investors prepare for a DOGE Moon mission.
- News of progress toward a BTC-spot ETF market offers modest support after the SEC misses opening to approve 12 BTC-spot ETFs.
- XRP-spot ETF fake news overshadowed important SEC v Ripple case-related news.
SEC Delays BTC-Spot ETF Decisions
A narrow approval window for 12 BTC-spot ETFs closed on Friday. On Wednesday, the SEC delayed the decision on the Hashdex request to change to a Bitcoin futures and spot ETF. On Friday, the SEC announced the postponement of the Franklin Bitcoin ETF decision. Bloomberg Intelligence ETF analyst James Seyffart shared the news.
Despite the delays, news of progress toward a BTC-spot ETF market provided some comfort. Bloomberg Intelligence Analyst Eric Balchunas had this to say,
“Hearing chatter SEC’s Trading & Markets engaged w/ exchanges this week on spot bitcoin ETF 19b-4s, is advising them they’d like the ETFs to do cash creates (vs. in kind), and has asked them to get amendments in next couple wks. This isn’t unexpected but good sign nonetheless.”
“Only 2-3 filers had planned cash creates, the rest wanted to do in-kind. So may have to adjust or risk delay. Anyway, this doesn’t change our 90% odds up or down but is good sign the process marching and SEC has a path fwd in the plumbing that they are comfortable with.”
Cash creation means brokers trade ETF creation units with cash, unlike in-kind trades, where brokers would trade BTC-spot ETF units with BTC.
The markets responded positively to the news, with BTC ending the Friday session in the green. However, BTC declined 1.31% to $36,647, Monday through Friday.
SEC v Ripple Case: Court Schedule Sends the Case into April 2024
On Monday, Judge Analisa Torres issued the scheduling order for the final stage of the SEC v Ripple case. According to the court order, the SEC and Ripple must complete remedies-related discovery by February 12, 2024. The SEC and Ripple must file remedies-related briefs by March 13, 2024, and April 12, 2024, respectively. Finally, the SEC must file any reply to the Ripple brief by April 19, 2024.
The final stage of the case relates to the remaining charge of XRP sales to institutional investors and associated penalties. While the SEC is eyeing a $770 million disgorgement, legal experts believe the final penalty will be substantially lower.
CryptoLaw US founder and amicus curiae attorney John E. Deaton provided detailed reasons why the penalty will be far less than $770 million. Deaton cited three case laws likely to feature in the Ripple brief.
- Liu v SEC: A penalty award cannot exceed the net profits of the wrongdoer and must go to the victims.
- SEC v Govil: The court held that the SEC may not ask for a crippling penalty without proving investors suffered actual financial harm.
- Morrisson v National Australia Bank: The court held that the SEC only has jurisdiction over US-based sales.
Considering the three case laws,
- Net profits exclude business-related costs, reducing the $770 million inflow from sales to institutional investors.
- There will be a debate on who suffered harm. Deaton argued that XRP has a higher value now than at the time of XRP sales to institutional investors.
- Before calculating net profits, Ripple will deduct all non-US sales of XRP from the $770 million. If 95% of sales were to non-US institutional investors, the starting point would be under $39 million.
Despite the favorable case law, XRP declined by 7.43% to $0.6118, Monday through Friday. The prospects of the case extending into the summer weighed on buyer appetite. There is also the threat of the SEC appealing the Programmatic Sales ruling after the case.
XRP-Spot ETF Fake News Sent XRP to $0.75
The pump and dump lasted less than one hour. James Seyffart initially responded to the news of the filing, saying,
“Didn’t see this one coming. It’s definitely on the site. Similar filing info to the Ethereum Trust filing. This XRP trust would be a sign of BlackRock truly going after the SEC if this is really from BlackRock.”
The fake news briefly countered updates from the ongoing SEC v Ripple case.
Dogecoin (DOGE) Rockets to a Friday High of $0.0877
Peregrine Mission 1 will carry 21 payloads and could be the first lunar landing since Apollo 17. The cargo includes scientific instruments, tech, mementos, and other payloads.
According to the payload manifest, there will also be a copy of the Genesis Block, the first mined block of bitcoin (BTC), and a physical coin loaded with one Bitcoin. The launch will happen in December 2023.
Monday to Friday, DOGE was up 9.64% to $0.0853.