Hedge Fund CIO: “Such Drama Should Remind Us To Do Those Things We Find Least Comfortable”

By Eric Peters, CIO of One River Asset Management

US District Judge Analisa Torres granted summary judgment to Ripple on claims by the Securities and Exchange Commission that it sold unregistered securities through sales to retail investors on digital asset exchanges.

Torres reasoned that such investors did not know that Ripple was on the other side of the trade, so they could not have known or expected that Ripple would use the money to boost the value of its token (XRP).

It was phenomenal news for Ripple, many other tokens, and for digital asset exchanges. The judge, however, also ruled that sales of XRP to institutional investors were unregistered securities.

This second ruling was not in Ripple’s favor, but it had no bearing on digital asset exchanges. So, for Ripple, the news was mixed, but XRP nevertheless rocketed 75%.

There is no greater gravitational force in financial markets than uncertainty, and after a 3yr legal battle with the SEC, it had largely lifted.

Coinbase shares surged 25%, its largest one-day gain as a public company. Judge Torres’s ruling weakened the SEC’s case against Coinbase in dramatic fashion.

Like all things in crypto, the moves are big, the cycles compressed. With no buyer of last resort, no central bank to bail you out, hostile regulators, frightened incumbent banks, and politicians with agendas that are difficult to comprehend, crypto markets are where the rawest lessons in investing can be learnt.

On Nov 9th last year when Binance withdrew its bid to acquire FTX, Sequoia wrote down its $210mm investment to $0, and the SEC/DOJ opened investigations, the NYT ran this headline: “Is this Crypto’s Lehman Moment?”

Markets plunged. Bitcoin fell to around $15,800. Ethereum hit $1,100. They’re now up 92% and 76% respectively.

And on June 6th when the SEC sued Coinbase, its stock traded around $40 pre-market. It is up 133% from those lows and +200% from the Nov 9th panic lows.

Such drama should remind us to do those things we find least comfortable. To lean against the crowd, its panic. To reflect on our own emotions so that we can deny them. In the pursuit of profit.