The past 10 days have been monumental for the crypto industry with major developments on the legislative and regulatory fronts.

And the Ethereum ETF is only one part.

Before we get to that, though… let’s talk about the ETF.

And suss out:

How Did Everyone Get it Wrong?

Last week, our argument on the Ethereum ETF was simple: the market is too pessimistic.

On Friday, we wrote:

“There’s reason to believe the market might be undervaluing the odds.”

When a few of my crypto friends saw this, by the way, they thought I was crazy.

I pointed out the asymmetrical bet:

Because of the overwhelming negativity, the downside on Ethereum seemed fairly capped, and the potential upside (at about $2,900 ETH last week) was pretty compelling.

Welp. Anyone who heeded the call is happy.

Ethereum is up almost 30% in a week, to $3,750.

Upon writing, the Polymarket betting market now puts an ETF approval at 69% -- a shocking reversal from the mere 10% on Friday.

How could we tell?

As one example cited on Monday, traditional finance was showing signs of bullishness.

The discount window on the Grayscale closed-end fund ETHE was trending toward closing, indicating that traditional finance was becoming bullish on an Ethereum ETF.

James and I have long emphasized that when an Ethereum ETF is approved, that discount will evaporate.

On Monday, the discount was 25%. Today? It’s 6.6%.

We were also under the impression that most were overestimating the likelihood of the SEC cracking down harshly on Ethereum. (For a variety of reasons, including the SEC greenlit Ethereum futures late last year.)

This led us to believe that the odds were way higher than the market anticipated.

But the ETF drama is just the tip of the iceberg.

There were several other monumental crypto developments in D.C. in the past week.

The White House Flips

One significant victory last week was the repeal of the SEC's Staff Accounting Bulletin 121 (SAB 121).

This obscure accounting rule, put in place by SEC Chair Gary Gensler, made it difficult for U.S. companies to custody crypto assets.

The repeal bill passed Congress with a 68-30 vote in the Senate, garnering support from 21 Democrats who broke ranks with the Biden administration's stance.

The bill now awaits President Biden's decision to either let it pass or veto it.

He promised to veto it. So he might veto it.

But it doesn’t matter.

Biden WON’T Veto This

Perhaps the most consequential event this week is the vote on the Financial Innovation and Technology for the 21st Century (FIT 21) Act.

Earlier today, the Biden administration reported they will NOT veto FIT21 if it passes.

Here’s why this is a big deal:

This bipartisan legislation, championed by crypto-friendly Representative Patrick McHenry, aims to provide much-needed regulatory clarity for the crypto industry.

Key provisions of the bill include:

• Defining "digital assets" under federal law for the first time.
• Clarifying the jurisdictions of the SEC and the Commodity Futures Trading Commission (CFTC) over digital assets.
• Establishing a decentralization test to determine whether a digital asset is a commodity or a security. (Estimates suggest 60%+ cryptocurrencies would be deemed commodities.)
• Providing a path for startups to transition from centralized to decentralized networks.

Rep. McHenry emphasized the importance of the bill for consumer protection, fostering innovation, and providing regulatory clarity.

The vote on the FIT 21 Act is seen as an acid test for whether Congress is pro-crypto or anti-crypto.

Biggest crypto week… ever.