Crypto Roundup: Coinbase CEO Weighs In On Bitcoin ETF, Layer 2 Tokens: Worth The Risk?

Welcome back, folks! We hope you had a delightful Thanksgiving break filled with good food and great company.

Quick question… Around the dinner table, did the convo ever drift away from the crazy uncle and his political rants? Did you ever talk about cryptocurrencies?

Then Crypto Roundup is for you.

Last week, we took a well-deserved pause to give thanks and enjoy some turkey. But the world of cryptocurrency didn’t skip a beat. It continued to cook up some intriguing developments, just in time for us to dive back in.

This week, we’re serving up a hearty helping of crypto news, seasoned with our signature blend of informative insights and a dash of fun. So, grab your leftovers and settle in… 🦃📈

Coinbase CEO Still Optimistic On Bitcoin ETF Approval ✅

Brian Armstrong, the CEO of Coinbase (Nasdaq: COIN), recently expressed optimism about the potential approval of a spot Bitcoin ETF.

In an interview with Decrypt, he said that while he doesn’t possess any insider knowledge, he thinks a Bitcoin ETF might be approved in the coming year.

As we’ve covered, this development is eagerly anticipated within the crypto industry. It would allow investors to directly participate in the crypto market without the hassle of setting up an account on a platform (like Coinbase), buying crypto directly, and securing it properly.

In other words, it’s seen as the Holy Grail for mainstream adoption within the investment community.

Armstrong’s optimism stems partly from the SEC’s recent legal setbacks. Courts have challenged the SEC’s reasons for denying ETF applications, suggesting that if the SEC cannot provide valid alternative reasons, it might eventually have to approve an ETF. This development followed the U.S. Court of Appeals’ directive to the SEC to reconsider Grayscale’s application to convert its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF.

Recently, the SEC delayed decisions on the ETF applications of Franklin Templeton and Hashdex, with a decision deadline set for January 1. Bloomberg analysts interpret this delay as potentially paving the way for simultaneous ETF approvals, which are expected before January 10.

It should be noted that Coinbase plays a significant role in the ETF landscape — 10 out of 13 prospective Bitcoin ETF issuers have Coinbase listed as their custodian. So, an approval would mean big business for Coinbase in the form of custodial fees.

Translation: While COIN has rallied significantly this year, it may be just the beginning of something much bigger. If you’re a risk-tolerant growth investor looking for a picks-and-shovels-type play on cryptocurrency, COIN may be a good place to start your hunt.

🪙Layer 2 Tokens: Worth The Risk?

Crypto investors are witnessing a notable resurgence across the board. But if you’re looking beyond the traditional players like Bitcoin and Ethereum, you may have noticed some talk about the realm of “Layer 2” tokens.

These tokens, are integral to projects built atop “Layer 1” blockchains like Bitcoin and Ethereum. And wouldn’t ya know it… they are experiencing a revival after a period of stagnation, too.

As Reuters notes, this resurgence is partly fueled by the anticipation of relaxed U.S. borrowing costs and the potential approval of a U.S. spot bitcoin exchange-traded fund.

But let’s back up first…

Layer 2 tokens are designed to enhance transaction speeds and reduce costs. This is a small corner of the cryptoverse — about a tenth of the total crypto market. For example, Matic is the largest Layer 2 token. It’s a key component of Polygon, a platform that alleviates congestion on the Ethereum network. And with a market cap of just $6.90 billion, its value has increased by 20% over the past month alone.

Other significant Layer 2 tokens, including Immutable, Mantle, Arbitrum, and Optimism, have also seen substantial growth and renewed attention from investors. Yet despite significant rallies, it’s worth noting that most of these tokens are still down significantly from their all-time highs over the past two years.

So, should you dip your toe in the water? Layer 2 tokens are often small, thinly traded, and highly volatile. Most people don’t know enough about the projects behind them (as interesting as they might be) to develop a high-level conviction. Plus, they are often the last to rise in a broad crypto market upswing and the first to fall when the market sentiment shifts. So, for most people, these are probably best avoided.

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