Why should you care about the Greyscale Bitcoin Fund lawsuit against the SEC? (@shortsegments)

Greyscale versus SEC

Summary:

The SEC ruling on Bitcoin ETF versus Bitcoin Futures ETF is inconsistent with SEC rules.
The SEC approval of Bitcoin Futures ETF instead of Bitcoin ETFs is detrimental to investors
A win here for Greyscale could trigger a Bull Run

Greyscale versus SEC: a more detailed explanation

A Long awaited trial has started.

The opening arguments in the trial by the SEC lawyer clearly revealed the central points of the case, and the inconsistency in the SEC rulings denying the applications of 11 applicants who wish to provide a U.S. Bitcoin Spot ETF versus SEC rulings allowing 5 applicants to create US Bitcoin Futures ETFs was immediately focused on by the judges of the panel.
This inconsistency being that the 11 applicants for a Bitcoin Spot ETF were denied due to the fact the two busiest exchanges where Bitcoin is traded and thus the two exchanges that the Spot ETFs would use for Bitcoin price information are not US regulated, so the SEC refused to allow those exchange price feeds to satisfy the requirement for price feeds from two esxchanges to prevent Bitcoin price manipulationm. However the 5 approved applicants applications depend on the same two exchanges for price information needed to satisfy the SEC demand for two exchanges price feed to prevent Bitcoin price manipulation, yet the SEC approved them.
The SECs position is that the Futures ETFs trade primarily on the CBE, a US regulated exchange, while the Spot ETFs would provide the trades themselves. However the judges have stated this is an inconsequential difference and doesn't appear to support the denial of the 11 applications. But the court is allowing the SEC to present and explain it's position in court, but on the first day it became apparent that the judges weren't convinced and immediately put the SEC on the defensive by inquiring what the SEC would do if the judges ruled against them: retract the approval of the five, or retract the denial of the eleven.
Ironically, this inconsistency has been focused on repeatedly by the 11 rejected applicants, but their voices could be ignored. The voices of the Federal judges cannot be ignored and the judges don't make pleas, they give orders.
So the most important distinction is that the SEC has to listen to the judges.
This response by the judges to the SEC opening arguement has made it clear to some legal observers that the SEC may have only two choices at the conclusion of this trial. Either admit it was wrong approving the Bitcoin Futures ETFs or admit it was wrong in denying the 11 Bitcoin Spot ETFs.
It is clear from the transcript of the trial that the judges are already asking the SEC to state which choice would they choose on the first day of the trial, which suggests the legal facts speak for themselves, and this is just a process playing out.
So while it is uncertain if the judges will issue an order to do oine or the other, and they may leave that decision upto the SEC. It appears that the judges will force the SEC to admit it was wrong approving the Bitcoin Futures ETFs or admit it was wrong in denying the Bitcoin Spot ETFs.
This is enormously satisfying to the 11 rejected applicants, and to Bitcoin Maximalists worldwide.

Why should you care?

A Bitcoin Spot ETF, the kind requested by the 11 rejected applicants, allows you to get very close to actually owning Bitcoin without dealing with an exchange or learning how to perform self-custody of Bitcoin.
This is one major ingredient that would make it possible for millions of Americans to buy Bitcoin as a long term hold in their tax free retirement accounts, without dealing with Cryptocurrency exchanges or the complex process of self custody, as in creating a Bitcoin cryptocurrency wallet.
This would also allow massive investment into Bitcoin by institutions who invest trillions of dollars for others.
The amount of retirement and other investment funds held by institutional investment companies is so large, that just 1% of those funds is said to be larger then the current Bitcoin Market Cap. Which I defined as all the Bitcoin made to date.Such a huge amount of buying pressure would surely rise the price of Bitcoin as there isn't enough Bitcoin in existence to satisfy that sort of demand, and many Bitcoiners won't sell.
Add to that the popular notion that as surely as a high tide lifts all ships at sea, a bull run for Bitcoin should be a bull run for altcoins too.

Bitcoin Futures ETF (SEC approved) versus Bitcoin Spot ETF (SEC denied)

The ultimate irony here is that the Bitcoin Futures Contracts ETFs that the SEC approved, don’t allow you to own Bitcoin, you own a Futures Contract, for a short period of time.
And these contracts expire, so you are buying and selling them basically every month, as that is the nature of contracts which control assets, they exist for a fixed time period only.
Furthermore, due to the complexity of futures contracts, and the need to buy and sell them every month, hoping to buy the dip in price and sell on the increase in price, along with paying transaction fees on both buys and sells, it is normal for the average Bitcoin Futures Investor to lose 5-10% of their investment capitol trading Bitcoin Futures.
It’s important to realize when I say average, I mean median on a bell shaped curve. So 50% lose 5-10 percent and the other 50 percent are split between those 25% who lose more than 5-10% and those 25% who lose less then 5-10%, and included in that last 25% number is investors who actually make a profit.
Mathematically speakling futures trading for the masses is a losing proposition. The probabilities of success favor the house, just like in a gambling casino. - And as sobering as that math is, the more sobering fact is the majority of Bitcoin Futures ETF investors don’t understand they are not actual buying Bitcoin, nor do they understand the probabilities of success are stacked against them.
They are enthusiastic about Bitcoin, and happily buy investments giving them exposure to Bitcoin.
This concept of exposure being another smoke and mirrors trick, that robs trusting investors of their hard earned investment funds.
This is the real world, where the informed take advantage of the uninformed.

Final sobering and ironic detail here is...

The Bitcoin Spot ETFs allow you to own shares of an ETf, and the ETF owns the Bitcoin, so the investors own pieces of actual Bitcoin. This is an easy way to hold Bitcoin in your retirement account long term.
From Investopedia:

Understanding Bitcoin ETFs
In an exchange-traded fund that tracks stocks, the stocks are purchased by the fund. These are the fund's holdings, and the company that bought them offers fractionalized shares on exchanges, which trade nearly 24 hours per day, seven days per week. A Bitcoin ETF, following this structure, would need to purchase and hold bitcoin. It would then offer fractionalized shares of its holdings on an exchange, which could be traded similar to a traditional ETF. Source

Important comment about the probability of investment success of Bitcoin held long term:

This type of buy and hold behavior for Bitcoin has a much greater probability of success. History shows us that for people holding Bitcoin over 4-5 year periods 50%, meaning median again, of investments in Bitcoin are profitable. And in stark contrast to Futures, the remaining 50% is split between those who are profitable but less so then the median, and 25% who are more profitable then the median. I think thats fricking amazing, and we should shout it from the roof tops.
That’s the math and math is just facts.
At this point in the article you are either angry, disappointed or both.

Final Irony

The final ironic is that the SEC rejected this vehicles as a choice for investors. This one where math and asset posseession are on the investors side, but instead provided investors futures contracts, where the majority lose money. Which by all appearances and outcomes is a decision which is inconsistent with the SEC stated purpose;to protect investors.
I think this inconsistency will also be pointed out ti the judges by the plaintif suing the SEC.
I feel sorry for the SEC lawyer who has to try and defend these actions as part of their job.
And I look forward to learning more as the trial resumes on Monday.