Appearing on Benzinga's PreMarket Prep on Monday, Joe Saluzzi, co-founder and co-head of Themis Trading, said he was a fan of Gary Gensler until the Securities and Exchange Commission (SEC) chairman "caved" on the recent approval of spot Bitcoin ETFs.

Why Gensler Should Have "Held The Line," According to Saluzzi

The co-author of "Broken Markets" said Gensler and SEC "proposed too much" and ran "into the crypto machine" ready to fight his regulation proposals in the courts. This overwhelmed the agency, with Gensler eventually having to yield on the approvals of the ETFs – "he caved on that" and "he should've held the line," Saluzzi said.

In his opinion, cryptocurrency owners will be the "bag holders," with Bitcoin (CRYPTO: BTC) sliding 15% from its approval highs. "The BlackRocks of the world are going to make a ton of money, they're out there laughing," according to Saluzzi.

The SEC's Biggest Mistake

"The biggest mistake they [SEC] made was approving the Bitcoin futures ETF, that set the precedent for this," Saluzzi added.

This aspect becomes particularly noteworthy given that the SEC is soon to make a comparable decision regarding the approval of spot Ethereum (CRYPTO: ETH) ETFs. The legal context for these Ethereum ETFs is somewhat parallel, considering that Ethereum futures ETFs have already received approval for trading.

Yet, in the press release that accompanied the approval of the Bitcoin ETF, Gensler emphasized that the decision "is not an endorsement" of Bitcoin, highlighting Bitcoin's unique status as a digital commodity—a distinction Gensler has not made for Ethereum.

Why Saluzzi Backs Away From Crypto ETFs

"I don't have a problem with crypto," Saluzzi said, but the ETF "wrapper" gives Bitcoin a "seal of approval" that is, in his opinion, unwarranted.

Cryptocurrency markets still don't have the necessary "surveillance" in place, something the SEC required but still "caved on," Saluzzi added. 

The approval opens the proverbial Pandora's Box of cryptocurrency-related financial products, which already started with a BlackRock application for options trading on its iShares Bitcoin Trust (NASDAQ:IBIT) shares.

"When will the 5X Dogecoin ETF be put in a long-term portfolio?," Saluzzi asked half-jokingly.

Echoing Jamie Dimon's preference for stocks over cryptocurrencies, Saluzzi called more obscure leveraged ETFs "gambling," saying "that is not what the stock market is for." 

Vanguard Boycotts Are 'Laughable'

Asked about the backlash Vanguard received for not offering the Bitcoin ETFs for trading, Saluzzi said the company has every right to do that. "It is laughable" that some people lashed out at Vanguard over this, he said. 

When Will The Fed Use Its 'Timeouts'?

Inspired by the NFL PLayoffs Championship Games, Saluzzi pulled out an apt metaphor to describe the Federal Reserve's situation going into 2024: the Fed is "winning" and doesn't need to use its "timeouts" – meaning rate cuts – too quickly. But it's still good to have them "in their pocket."

In other words, Saluzzi expects rate cuts only to start in May, given the economy's resilience.

Conclusion

Bitcoin ETFs still seem to be somewhat off the mainstream adoption narrative that industry experts like to invoke, although, they're on everyone's lips.

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Image created with a photo from Third Way Think Tank on Flickr.