I'll say two things. First of all, I don't think that you can
paint the debut of spot bitcoiny ETFs as anything other than a monumental success period.
There's now something like sixty billion dollars in the category overall, which is
already more than half of what physical gold ETFs have, right, and physical
gold ETFs have been on the market for something like twenty years. I think
that's just mind blowing. And again, as I mentioned, I'm going to
keep coming back to this, I think we're just getting started. I just
talked about how advisors and institutional investors have only begun, you know, dipping
their toe into the water on these This content is brought to you by v
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visit vchain dot org. Link will be in a description. Welcome to the
Thinking Crypto Podcast. I'm your host, Tony Edward. With me today is
Nate Jerrasi, who's the president of the ETF Store and the co founder of
the ETF Institute. Nate, great to have you on. Thank you for
having me. Do we have anything to talk about as it pertains the crypto
ETFs? Nah? Nothing know, nothing going on, Nate. I'm excited.
As I mentioned before the recording, I'm really excited to speak with you
because I followed you on Twitter and you share a lot of insights and knowledge
about ETFs, and boy, there's so much going on and I have so
many questions for you. So I hope I'm not gonna bombard you, but
you know, I would love to get to know you a bit better.
Tell us about yourself, where you're from, which you grew up, in
your professional background? Yeah, sure, so I'm sort of from all over
the place. I actually grew up in a military family. My dad was
thirty years in the army, and so I obviously moved around quite a bit.
I actually lived in Germany from sixth grade to graduating high school. But
my mom's family's from New York. My dad's family's from California. So you
named the place. I probably lived there at some point. But I ended
up going to school at the University of Kansas, which that's a long story
in and of itself, which I won't bore you with. But KU is
about forty five minutes from Kansas City, and after living all over the place,
honestly, I just fell in love with this area. I thought it
was a great place to raise a family. It offered big city amenities but
still has a small town feel, and so I love it here now.
In terms of my professional background, after I graduated from KU, I went
to work for a startup tech company. And what's interesting is this was right
in the heart of the dot combo. So this was like two thousand and
I was actually one of the earlier employees there, and this particular company bucked
to Trent, so there were a lot of dot com bus. We ended
up being a pretty amazing success story. Company grew to like seven eight hundred
employees. And while I was there, I had a front row seat to
everything in terms of building that company, and I had my hands in nearly
everything. So I managed a team, a fairly sizable team. I managed
a company's cash, I did financial forecasting, I worked with it and project
managers. I interacted with attorneys, I managed intellectual property. I probably couldn't
have asked for a better opportunity just to learn about building and growing a business.
Now, while I was there, I knocked out my MBA, and
my emphasis was actually in investing, and I think that probably starts down the
path to where I'm currently at. And the long and short of it is,
I always had a passion around personal finance and investing, I would say,
as long as I can remember, I mean going back to when I
was a kid. I always felt like I would do something in the space.
And so around two thousand and six, two thousand and seven, I
had worked directly for the CFO at that tech company, that dot com company
I mentioned, and we had always talked stocks and investments in our personal accounts.
Right we trade stock tips, I'm investing in this, he's investing in
that. Just had fun with it. But back at that time, we
both were investing in ETFs in our own personal accounts, and one day,
I believe it was like early two thousand and eight, we were having a
drink at a bar and this concept for the ETF store came up. We
thought, why don't we start an investment advisory firm branded around ETFs, because
again, we both had been using ETFs in our personal account and you know,
we thought ETFs had all sorts of potential benefits and investors, but we
didn't really hear about anybody else using them at that time, particularly other advisory
firms. There were a lot of advisory firms that were just pushing proprietary product
because they receive commissions from doing so. And so this marriage of the RIA
the registered investment advisory model, which we can talk a little bit about if
you're interested in the ETF vehicle, we thought was a winning combination for a
business. But all telling it, I'm happy to go into it. We
started that in two thousand. So it's funny I started early on at a
tech company or a dot com company in the middle of the dot com bubble
and then started an investment advisory firm and the teeth of the financial crisis,
Tony, we bloodied our noes. You know. I think we came into
the business very overconfident, to say the least. I think we both felt
like we knew a lot of people around town. That would be easy because
we had these all ETF portfolios. People would be tripping over themselves to hand
us their money. Very naive in hindsight, and at that time around the
financial crisis, people were scared, right. They weren't going to hand their
accounts over to somebody who didn't have any experience in the business. And it
was nobody knew what ETFs were at the time. So long story short,
we took a lot of bullets early on. And what we did right is
we built a really good foundation for an investment advisory firm. And I'll just
wrap this up by saying, so around twenty eleven, we were thinking about,
Okay, how do we educate the market on what ETFs were. In
true story, I was sitting in the Starbucks here in Kansas City. I
was meeting with a business acquaintance and they were saying, you know, Nate
nobody knows what an ETF is. And I was like, yes, you
know, it's twenty eleven. Certainly people know what an ETF is. Now
They're like, no, I don't think so. So I got up,
I walked around the Starbucks. There are probably fifty people there. I asked
every single person have you ever heard of an ETF? Not one person that
heard of an ETF. So I came back and was like, you're right,
we have a big problem. How do we fix that? And so,
long story short, I launched a radio show in Kansas City focused on
educating the market on ETFs. That radio show ultimately morphed into what is today
the ETF Prime Podcast. So I believe back in twenty eleven it was one
of the first ETF podcasts, if not the first ETF podcast that that was
out there. And so that kind of started the trajectory of just educating the
marketplace on ETFs. And I'll just I'll wrap this long die drive up by
saying I also blog website called the ETF Educator dot com. And then I
co founded, i think, as you mentioned, something called the ETF Institute,
which is professional education and certification around ETF. So what let me pause,
there, No, that's it's great, Nate. You're certainly a pioneer
in the ETF business and educating folks and building awareness. So that's amazing.
And I love that Starbucks story, you know, kind of the grassroots just
going uh to figure out what what are people thinking and what what is their
level of understanding. I have a cool question, you know, given that
you saw the dot com bubble or market rise and then collapse, are you
seeing any comparisons or similarities to what's happening in crypto? Yeah? I don't
think so, because we are just completely different markets. I'm not a big
fan. I always pay attention to history, and I think it's important to
understand history, and especially history and financial markets. I'm very hesitant to try
to draw conclusions from that history and bring it forward to the to the present
day. So I can see where there are echoes of the dot com bubble
in crypto. But look, if you look at crypto's life cycle, I
mean, Bitcoin's already been out there for fifteen years. We've seen several boom
and bus cycles. I just think it's different. Again, there's certain things
we can get into in terms of the parallels between Dot com and crypto,
but I don't I don't see in terms of a bubble or bus. I
don't see that today. No in crypto, Oh yeah, yeah, And
I guess you know, the dot com boom was mostly US based, while
crypto is a global acid class and there's you know, accessible accessible excuse me,
by everyone if we have internet connection around the globe for sure. Yeah.
So, a bit about you and the folks at the ETF Store as
investment advisors, and your processes and outlook on the bitcoint ETFs and how you're
approaching clients about that, I guess if you can start with the first round
of approvals, what was your next steps and what was your strategy to start
presenting it to your clients. Yeah, so let me back up and just
tell you a little bit about the ETF Store, the investment advisory business itself.
So we work primarily with retail clients, managing all the types of accounts
that you would expect, retirement accounts, right, iras, taxable accounts,
trust, so on and so forth. We are a full service wealth manager,
so in other words, we can do everything financial planning, budgeting,
insurance. We can handle just about any aspect of a client's financial life.
Now, on the investment side, obviously we do focus on ETFs. That's
that's a given with the name of the firm, and we offer a range
of ETF model portfolios which we do manage in house, and if I look
at our clients, a lot of our clients are using those models. However,
I think it's important to note our advisors can use any type of investment
right We're going to do whatever's best for the d client at the end of
the day. But we do believe ETFs are very effective at providing low cost
and efficient exposure to the markets, and so I think that's a good segue
into bitcoin ETFs. And the way that I'll lay this out for you is
all of our advisors currently do have the ability to offer spot bitcoin ETFs to
clients. However, spot bitcoin ETFs are not currently in the model portfolios that
I mentioned. I do envision that happening at some point, at least within
some of our models, But among our advisory team, I would say there's
still a lot of education going on in terms of the in client and the
consensus among our team is that it first makes more sense to just have the
ability to offer spot bitcoin ETFs to clients versus essentially forcing it upon them within
our portfolios. Now that may surprise you. It may surprise some people listening
to this podcast, because people that follow me see me, you know,
continually advocating for spot bitcoin ETFs, and I want to I want to explain
this. So obviously I've been a huge advocate for bringing spot bitcoin ETFs to
market. But when I'm out on Twitter, I'm speaking on behalf of myself,
okay, not on behalf of our team of advisors, and ultimately our
team of advisors and our clients have to be comfortable. But here's what else
I'll tell you, which I think is very important. I do believe our
firm is way out ahead of many advisory firms in terms of our knowledge around
crypto and bitcoin. And so if you think about this, this is important.
If a firm like ours, and again you mentioned I'm what I'm doing
on Twitter in my knowledge of the space, if a firm like ours still
has an incorporated Spot bitcoin ETFs as a primary holding in our model portfolios,
think about how early we still are in all this. And that's not any
sort of statement on the current or future price of bitcoin. I'm not in
the business and making predictions on crypto prices, but I think we are so
early an adoption. And you have to remember many advisors such as US and
many institutional investors, they have extremely rigorous due diligence processes. Right, They're
not just going to jump into something like spot bitcoiny ETFs overnight. It takes
some time. And so that's what's amazed me about how successful spot bitcoin ETFs
are because again I know argue of them and how we think about them.
I just think we're so early, right, I mean, we're not even
fully allocated a firm like our because this thing is in like the top of
the first inning, yeah, I mean, and then when you think about
it, I know it's been growing significantly significantly like black Rocks ETF, but
it's only been what is it, Nate, like five months? Five months?
Yeah, yeah, that hasn't been like two years or something where people
are comfortable, and I know many of the etf fatures are going out building
their brand awareness, educating folks. So it's going to take time, like
you're saying, for all, walk run education is a huge part of this,
and again really educating the end clients because as an advisor we can understand
it inside and out, but clients have to get it as well. So
I'm curious, and this is kind of like the macro for all of the
financial advisors, rias and so forth. But also, you guys, what's
your timeline that you're looking Maybe is it a one year window or two year
window or five year window where we're like, you know, that's when we're
going to go full all in, right, We're going to pull the lever
and add it to the portfolio and so forth. Yeah, I'm not going
to put a timeframe moment. I think it's going to vary by the type
of advisor and investor, depends on their investment approach. Right, we can
look at the run up at bitcoin has had overall since the launch of ETS.
Is now a great time for an entry point? I think we can
debate that where does this fit within a portfolio? I personally tend to view
bitcoin is an alternative, something that is more akin to digital gold. And
so my point of bringing that up is, you know, does an advisor
view it like that? Do they view it more as coming out of the
equity holdings? All of this plays into how they go about allocating it within
a portfolio. There's some firms that they want to see these things on the
market for a certain period of time. That's not us. I'm comfortable because
I know how the ETF structure. I'm comfortable that these are functioning exactly as
they should. But there are some firms that want to see a longer track
record, and so perhaps they want to see these trading for a year or
two or three before they'll invest. It's just going to vary by the type
of advisor or investor. So NY I got to ask, given your plethora
of experience around ETFs, have you ever seen anything like this that the amount
of inflows I think was it black Rocks is the fastest growing ever ETF.
And do you expect this trend to continue? I do? I mean,
let me, I'll say two things. First of all, I don't think
that you can paint the debut of spot Bitcoiny ETFs as anything other than a
monumental success period. There's now something like sixty billion dollars in the category overall,
which is already more than half of what physical gold ETFs have, right,
and physical gold ETFs have been on the mar it for something like twenty
years. I think that's just mind blowing. You look earlier this week,
I believe on Tuesday, five months after launch, we had a day where
there was a billion dollars in net inflows into these products in a single day.
There's been like fifteen billion dollars into these products overall. And again,
as I mentioned, I'm going to keep coming back to this, I think
we're just getting started. I just talked about how advisors and institutional investors have
only begun, you know, dipping their toe into the water on these But
I'll also say that I'm not shocked. I think I was one of the
few who was extremely bullish on the potential demand for spot bitcoin ETFs way before
it was cool. So I actually predicted in early January that spot bitcoin ETFs
would obliterate every ETF launch record out there, and I'm pretty sure that's about
what's happened. Yeah, So I can't say that I'm overly surprised by what
we've seen. I'll just tell you the reason I was optimistic was because of
direct conversations that I was having with investors and advisors. I could just tell
there was a lot of pent up demand. They wanted this product. And
the other thing was I had a lot of anecdotal evidence. So you'll find
this interesting anytime that I covered spot bitcoin ETFs on my ETF Prime podcast,
like clockwork downloads with spike and not just by a little, but these were
pretty big spikes. And so it was clear to me that the market wanted
spot bitcoin ETFs. And then the last thing I'll say, just regarding the
demand and what we've seen, you know, think about the names that are
involved in this space, Blackrock, Fidelity, Invesco, Franklin, Templeton.
When you see those types of firms file for spot bitcoin ETFs, I'm just
telling you those firms don't get out of bed for what they perceived as small
opportunities. And so the fact that those types of players wanted in on this
space, I think that should have made everybody, you know, relatively bullish
on what the demand will look like. Yeah. Absolutely, I'm still blown
away. I mean, I know you've been in the ETF business and kind
of had a pulse on this ahead of time, but you know, I'm
more familiar buying bigcoin directly and self custody and so forth. But I was
not expecting this type of performance. It's incredible. I'm so blown away and
I can't I'm really excited for what's coming for the remainder of this cycle and
this later this year into next year. Now, not everyone is a fan
of these ets van Guard and some of these folks are still on the fence
or you know, really against it, being contrarians. Do you think they're
going to capitulate eventually? It's tough to say. I mean, somebody like
van Guard just given the types of products that they have historically offer, I
certainly don't expect them to offer crypto ETFs anytime soon. But you know,
longer term, I'm of the belief crypto's here to stay, and we can
talk about tokenization and those sorts of things. I think ultimately securities will be
tokenized, and you know, so does that if you think about the path
of that, Does that incentivize somebody like Vanguard to make sure they're being forward
thinking and get involved in this market. And is a crypto etf a way
to do that? Yeah? Sure, But you know, I think it's
tough to predict what they'll do. But my my belief is that every major
et fisher who offers a broad spectrum of asset classes they should be involved in
crypto ETFs. And I'm honestly shocked when I look at issuers such as State
Street and Charles Schwab, you know, pretty pretty big etfisiers that they're not
offering crypto ETF shape doesn't make any sense to me? Do you think that?
And I know we can't get into the minds of people, but that's
a very bad business decision on their part, and eventually it will play out
over time where they lose market share as this acid class continues to grow and
there's so much demand for it. Yeah, I think that's possible. I
mean, my expectation is still that Charles Schwab excuse me, will ultimately launch
spot crypto products State Straight. We'll see, But yeah, I do think
it puts them at a disadvantage. Again, the numbers speak for themselves.
I just mentioned that the spot Big TWENTYTF category in five months is already at
sixty billion, So if you're if you're an issuer out there, you can't
ignore a category like that. Yeah, absolutely, And Nate, what we're
seeing some game theory playing out here. I know the United States was not
the first to launch body tips. I think Canada had it and so forth.
But look, United States has the largest capital market, so it was
the largest domino to fall first, but then Hong Kong and then London,
and I think just this past week Thailand or something like that. What are
your thoughts on the global launch of these uspot ETF products. Yeah, I
don't know that I have any profound thoughts on international spot crypto ETFs, other
than to say it's been clear to me that regulators in other countries have been
much more welcoming of crypto overall, I would say not not every country,
but on the balance, I think that's a fair assessment, and I think
the US it really needs a comprehensive crypto regulatory framework in place to move forward.
I think that what we saw in the process for spot bitcoin ETF's coming
to market, where it took a lawsuit from Grayscale to push those through.
We can talk spot ethere ETFs if you'd like, but that's indicative of the
lack of crypto regulatory framework we have in place that the way that that process
or those processes have played out. So I would prefer I'm not here.
You know, some nationalists waving the flag, but I look we live in
the United States. I would love to see the United States take the leadership
role as opposed to being a laggard in crypto. Absolutely speaking of the Ethererem's
bott EYTF. So we got the partial approvals. It seemed like the political
pressure maybe or I don't know if this was part of the SEC's plan,
but they kind of did it last minute, right. There was no communication
or proper communication with the filers, and then all of a sudden, a
week ahead of the deadline or the week of the deadline, Hey, we're
going to start approving these nineteen dash nineteen b dash force is it right?
And then we're going to work on the s once. What are your thoughts
on how that played out. I'm only smiling because I think I'm one of
the few people out there who have said that I don't think this whole thing
was primarily tied to politics, and I think, as you know, I
wasn't that surprised by the spot ETF nineteen be four approvals. It does seem
like just about everyone was expecting denial. But Tony, honestly, I try
to step back and just look at the evidence, and the fact is,
if you go back to October of last year, the SEC approved Ether Futures
ETFs, and this was after they had lost the Gray Scale lawsuit. This
was also, I think importantly, this was well after Ether had moved to
a proof of stak right. And you know, of course, as we
already covered, the SEC approved Spot bitcoin ETFs in January. So just think
about this. We had the Gray Scale lawsuit, which the very basic thrust
of that was, since the SEC approved Bitcoin futures ETFs, they needed to
approve Spot bitcoin ETFs. Right, the spot in futures markets are highly intertwined,
which I don't think that takes a rocket scientist to figure out. Okay,
so you take Gray Scales lawsuit victory, the SEC approval of Ether Futures
ETFs, and then their approval of Spot bitcoin ETFs. This seemed pretty straightforward
to me that we would get Spot ether ETF approval at least, you know,
I was optimistic on the prospects there. And then I'll add to that
we were given some clues along the way. So if you go back and
look at the comments that SEC Commissioner Hester Pearce made, I think this was
back in January after spot bitcoin approval. She said that we don't need a
court to tell us the SEC that you know, our decision making was arbitrary
and capricious. In order to get the decision right on spot ether ETF approval.
We also got word that the SEC was engaging with issuers on leveraged ether
futures ETFs. That was in late April, Grayscale pulled their nineteen v four
filing on their thirty three acts the futures ETF which I only mentioned that because
if they thought the SEC was going to deny spot eth ETFs, then they
should have kept that filing out there to get a decision on it so they
could then use that in any subsequent court case if they decided to sue the
SEC for not approving spot eth ets. I could go on, but there
was a bunch of evidence along the way that I felt like people missed,
And you know what, was there some politics involved. I'm not sure that's
possible, but I think the SEC was going to be hard pressed to deny
these things. I think that if they had denied, they were going to
get suited again. I truly believed that, whether it was Gryscale or somebody
else. Yeah, I was talking a bit about that that this time around.
I don't know if Gary Genser wants to mess with black Rock, Fidelity,
Franklin Templeton, and the whole group of these folks who could all pull
a pile on litigation like crazy. But not only that, and maybe I
wasn't, you know, quite as eloquent as I wanted to be and what
I just described, but this was pretty straightforward. You had CMME traded ether
futures. The whole setup with spot ettfs was exactly the same that we saw
with spot bitcoin ETFs, and I just didn't see a path. How were
they going to overcome denying that? How were they going to win a lawsuit
on the things were exactly the same? I just didn't It didn't make sense
to me. So I kept going back to first principles on this in terms
of why I had some optimism. Now, you know, to be fair,
I wasn't out there saying I was one hundred percent sure these are going
to be approved, because you never know what the SEC is going to do.
I certainly saw a path where if the SEC denied them, I thought
that was a realistic possibility. I just believed that they would be sued and
ultimately lose that lawsuit. So I thought it was one of two things,
and I tweeted this out all along the way. I was like, they're
either going to be approved or the SEC is going to get sued. Absolutely,
Now, Nate, what's your best guess as to when these s ones
will be approved? Are we looking at another month, two to three months
or next year? And do you see the inflows being maybe fifty percent of
what bitcoins has been so far? Yeah? Two good questions. Look,
I don't know what the SEC is going to do, but every indication,
everything that I'm seeing, including some comments yesterday from SEC chair Gary Gensler,
is that they are attempting to proactively work through this process, get the updated
s ones in, haven't revised, will re summit him again. My expectation
would be in the next several weeks to you know, to two months.
Max. I could be wrong on that. I don't have any inside information.
I think I saw Bloomberg's Eric Balchuna set an over under of like July
fourth. I said I'd take the under on that. I think I would
stick with that that I would expect approval by July fourth, And then what's
your put Look, this we're guessing here, right, this is speculation,
But what do you think the inflows might be. Obviously, I think there
might not be as much demand as there is sorry a lighting issue. I
think that a reasonable proxy. So let's just start high level. Ether itself
is about one third the market cap of bitcoin. I think that that's a
reasonable proxy for what we will see in the ETF space. Now, some
people will say, uh, these ETFs aren't going to have the ability to
offer staking, so maybe that'll take some of the demand away, and I
think that's a reasonable argument. Maybe that pulls a little bit of demand away,
and it's not quite a third of what we saw from bitcoin ETFs,
it's a little bit less than that. But overall, I'm pretty optimistic on
what the flows will look like. I don't expect them to look like what
we saw from Spot bitcoin ETFs for for a couple of reasons. Again,
bitcoin's a bigger market, but also, uh, that was the first crypto
et A product out there, and so I think there again was pent of
demand that I don't know that we'll necessarily see from from Spot ether ets.
But look longer term, depending upon how this all plays out, I can
see a scenario where spot ets or every bit is big of a category this
spot nitcoin ETFs. That may take some time. It's going to evolve.
People are gonna have to understand ether and you know, what the applications are,
what the investment case is. But but yeah, I think it could
grow into a very sizable category over the long term. So I'm I'm overall
pretty bullish on what demand will look like. Let's talk a bit about the
staking aspect, because that's still up in the air with regards to what how
the SEC wants to treat it or how cryptoregulations play on the US because the
SEC sees that as a security offering and so forth. So let's say eventually
we get this sort of APT and the SEC says, look, you can
launch an ETF and eat ETF with staking. Maybe this is a dumb question.
Can that be attached to the existing ets or an entirely new ETF needs
to be launched with that. I just think the existing ETFs would be updated
and they would have the ability to stake and then obviously provide that yield to
end investors. I think it'd be that simple. You know, it's clear
that that's something the SEC is not currently comfortable with. I think that gets
into the whole discussion of whether or not Ether is a security. If you
look in the s ones that are filed, I believe there's quite a bit
of language around. You know, the regulatory winds could shift and maybe Ether
is labeled as a security at some point. I think all of that has
to be hashed out, no pun intended before obviously we get staking. I
do think ultimately staking will be a part of these at SSH. It's just
a matter of when that happens. Now, Nate, there's been a lot
of talks by media, CEOs and so forth of a Solana and an XRP
E TF possibly on the horizon, maybe twenty twenty five. But I know
the futures has to be approved for us. He has to go through the
same process Big one and e theorem has gone through. What is what likelihood
are you giving for these things to happen? Yeah, I mean you hit
then on the head. I guess it's going to take one of two things
in order for additional spot crypto ETFs to come to the market. So one
is what you said, We're going to have to have futures listed on a
venue that is regulated by the CFTC. So for example, we would need
to have CM traded Salona futures. Here's the thing, though, even if
we get those, the SEC is going to want to see a track record
all those. They're going to have to have some history of trading. And
then even if we get that, I think we would then need to see
Salona futures ETFs right, and then ultimately we'd get a spot Solana etf.
If you think about how long it would take for all of that to play
out, we're talking years in my opinion. The other path, which would
be much quicker and much easier in my opinion, would be for Congress to
put a legitimate regulatory framework in place for crypto right where there's a clear definition
of what's a security and what's a commodity and who has oversight. I think
if that can get done, then other crypto ETFs could come to market much
sooner. But you know, as you know, we're also in an election
here, so we talked a little bit about the political wins. Who knows
how that's all going to play out and whether we can get Congress to actually
put a crypto regulatory framework in place. I think I am less than optimistic
about that right now. And so that's a long way of saying I don't
expect to see Solana or XRP ETFs come to market time, so I really
don't question about basket ETF. So, for example, once the etherorem ETF
spot ETF is live, could Blackwrok say, hey, we're going to offer
the top two bigcoe in Ether in this particular ETF. And then eventually,
let's say five years from now or three years and now the XRP Salona ETFs
are approved, could there be a top five, top ten basket of those
tokens in one ETF. I love this question because Tony, that's where this
is all heading. It's just a matter of time. So yes, in
the short term. I'm actually surprised that even today we haven't seen a filing
for a combined spot Bitcoin and spot ethere ETF. That shocks me. If
I was an issuer, I would have filed that already, and I think
you'll see one of two flavors there. You'll see just a very basic market
cap weighted approach. We talked about how Ether is about a third the market
cap and Bitcoin. You'll see somebody doing ETF that's just a market cap approach.
And then you'll also see etf that are actively managed, where you know,
issuers trying to make a determination of how much Bitcoin versus Ether they want
to own based on the underline market. Then to your question longer term,
yeah, I think we'll see h index based crypto ETFs. I think about
an issuer like bit wise, who already has a publicly traded fund, it's
not an ETF, it's you know, a basket of crypto assets. That's
what we're going to see in an ETF wrapper. And so you'll see index
based crypto ETFs, and you'll see actively managed crypto ETFs. Now, I
know there's some people listening here that and I've seen this out on Twitter where
they will go, you know, Bitcoin and Ether are two completely different crypto
assets, so why would I want to own these in the same ETF.
Well, that's exactly the point. You know, if you think about advisors,
advisors love diversification, right, So it's really that simple that to own
a diversified basket of crypto assets I think would be attractive to the marketplace.
But yes, I think we have spot bitcoin ETFs today. I think we're
going to have Spoty through ETF soon. Well, then see combined spot Bitcoin
and Spotty through ETFs. And then, as I described before, once the
regulatory environment, once we have some clarity there in additional crypto assets come to
market, then you'll see index based and actively managed crypto ETF baskets. So,
Nate, we've seen in the crypto market there's a lot of volatility,
right. I don't think I've seen volatility like this in any other asset class,
although there may be some stocks that are moved like that, right,
but overall crypto is super volatile, and that could be because it's a young,
acid class. Will the ETFs help reduce some of that volatility kind of
maybe what they did with gold where gold became less volatile. I don't know
if I'm articulating that well, but yeah, I don't know. Look,
I guess potentially. But here's what I always say. ETFs are simply investment
vehicle. Right, if someone wants to buy bitcoin, they can buy it
direct, they can buy it on an exchange where they can use an investment
vehicle such as an ETF. And while the ETF has certainly opened up access,
I think to say that an investment wrapper can bring down the volatility of
an asset class. That doesn't necessarily make sense to me, right, So
I think about HIGHU old bonds, or technology stocks or or whatever you want
to pick. Just because those are available in an ETF doesn't bring down the
volatility of those asset classes. So I don't know that that's really a factor.
And I guess the other thing I would say, I personally view the
volatility of something like bitcoin as a positive. I think that's a feature,
not a bug. I think if you have a globally diversified portfolio and you
have a small allocation to bitcoin, let's just call it five percent. If
your size in that position correctly, right, So that five percent, and
you're rebalancing in a highly disciplined manner, the volatility works in your favor.
So yeah, I don't I don't think the ETF impacts that. You know,
maybe somebody has some academic study out there somewhere that shows opening up access
brings it down. But again, I just view the ETF as it's a
pass through vehicles, and it's a way to access an asset class, and
just because you have that access doesn't necessarily bring down the volatility. Well,
or is it not so much the ETF product itself, but rather on ramps
being built in different ways where there's more liquidity coming up, coming in and
more people are getting access to the assets. So maybe it's just naturally over
time. I think that's fair. And also to your point, I think
by opening, by having those on ramps and opening up access, what that
does is that brings a wide variety of investors to the table, right,
with much different motivations. And so maybe because of that you get some reduction
volatility. You know. Again, that's that's probably outside my pay Gray,
I'll leave it to the academic walks to figure that out. Yeah, So
Nate, look, we've seen the four year cycles, the blow off tops
and so forth. Possibly twenty twenty five we may see that, and we
talk about rebalancing our portfolios. So are you expecting a major sell off not
only an ETS. Well, we've seen major sellofs outside of ets, right,
but with the ETFs, a good amount of outflows maybe twelve months from
now. Look, well, one thing I don't do. I don't make
any price predictions. You know, I don't have a crystal ball. I
always say my crystal ball is broken, So I'm not going to make any
sort of uh, you know, prognostication on where the future price of bitcoin
or any crypto as it will be. In terms of flows, I expect
demand to be similar to what we've seen already. If anything, I think
demand is going to continue ramping up for all the reasons I described earlier,
and that advisors and institutional investors are just now wading in to these products.
It's a trickle at this point. I believe that's only going to increase.
So I think demand's going to continue to be along the lines of what we
we've seen. I don't expect some big drop off, if anything. If
I had a guess, I would expect demand to accelerate. Sure, tough
question for you, and this is more of speculating and trying to maybe get
an idea predicting what the future may look like. How do you think the
ETF industry is going to change? If there is any change based on these
ETFs, giving the performance, giving the global distribution of the asset, and
many of them are hardcap, like big ones hardcap, do you see any
major changes to the ETF industry and models based on this? No, I
mean if I'm understanding your question, are you saying that that that this may
change the actions of issuers within the industry. Oh yeah, whether it be
the issuers or the type of ETFs that are offered. Uh does it?
I think we had you had hinted towards it earlier about like tokenization. We
may see ETFs around to tokenization of real world assets. Yeah, yeah,
yeah, I don't think so. I think that again, if you look
at the largest players in the space, I mean think about again, let's
talk about black Rock and Franklin Templeton. I would put wisdom Tree in this
category. They're already tokenizing funds, right, we see, we see tokenized
money market funds out there. Wisdom Tree has something called wisdom Tree Prime with
tokenized funds. It's already moving in that direction. I don't think the success
of the ETFs necessarily changes that. Certainly, players who are not currently involved
in the crypto space are going to be looking at the success of the spot
ETFs and maybe looking at what people like black Rock and Franklin Templeton and Wisdom
Tree are doing and saying, hey, we need to get involved there.
But I think we're already moving down the path, I think what will accelerate
it, and this is I think a common theme in our conversation here today
is just clarity from a regulatory perspective. I think that's going to be the
real accelerant here to you know, enacting real change not just within the ETF
space, but just across the entire asset management complex. Do you see eventually
that some of these ETFs and I don't know if this makes sense, but
go on chain they become tokenized where it's a part of the global twenty four
to seven trading on the blockchain one hundred percent. I mean, I think
I mentioned this before. Tokenization, in my opinion, is where this is
all heading and all goes far is to say that I think ultimate ETFs themselves
again will be replaced by token is securities. And that's that's what I'm saying.
Mean, we're already seeing that from with these tokenized money market funds.
You know, ultimately, what it's about is it's about efficiency. It's about
cutting out intermediaries, right, fee takers. That's what tokenization brings to the
table, and I think that's attractive to asset managers. They want to cut
out those intermediaries, right people who are taking fees both from them and the
end clients. So yeah, I think ultimately we will. This is all
heading towards tokenization. What's the timeframe? Who knows? You know, we're
probably on a decade plus type timeframe with that, but I think that's where
we're heading. I was just about to ask you, like, is it
too early for you guys to start game planning on this and how would that
change your jobs? If it's a twenty four to seven market look and asset
management things are always evolving, so I think we have to evolve with them.
That's why I'm a big belief or that even I'll just take my business,
the registered investment advisory business. If there's an advisor listening to this and
they just completely believe crypto is a scam, you know they can't stand it.
I don't care. You have to educate yourself as an advisor because your
clients are going to be asking for it if nothing else, are gonna have
questions about it. You need to be able to intelligently speak to that.
We've talked about all these large asset managers getting involved in the space. This
is not going away. I always say that whether you believe in it from
an investment thesis perspective or not. The underlying blockchain technology and what we're seeing
with tokens is not going away, period. So you have one or two
options. You can either ignore it at your own peril, or you can
get educated on it. It's that simple. Absolutely. Maybe along the lines
of what you were talking about how this will change your business, are you
exploring using blockchaining any way in the backs, in the back end of your
business, improving things and whatever may be. Yeah, it's a great question.
Right now, the answer is no, there's nothing immediately that I can
look at where I think that would be beneficial. More so just because of
the side. We're a small boutique r I A. Right, if we
were if I was running a you know, trillion dollar asset manager, then
it would be a different story. But look, but again that I'm sure
will change as things go along. I think a good example of that would
be something like chat GBT right in artificial intelligence. That is something that we
are starting to leverage within our business, and so as technology changes, I
think you have to look at that technology and implement it where it makes sense.
For sure, you know, with the ETF success and boy, I
mean all these big players, big names that we mentioned, Black Row,
Fideli and so forth. Do you think this stigma is entirely gone, all
the ft X fallout and all the nonsense that took place there. It is
definitely behind us, like we've gone to a higher plateau and it's forward looking
now and nobody's looking back. I don't know. I mean that dirty laundry
is always going to be there. I think that it's probably been marginalized more
to a certain extent because of the success we've seen from spot, Bitcoin,
ETFs and the big players getting involved in crypto now. But you know,
look, Tony, any industry is going to have it's good and bad players,
unfortunately. Yeah, and in an emerging industry such as crypto, it
is going to be you know, it's fertile ground for fraud. It just
is that doesn't make the industry bad. It's just that those are things that
need to be worked through. And I think that's one of the things that's
been lost here over the past several years is it's real easy to focus on
the bad behavior and some of the fraud and some of the things that have
taken place, and I'm not saying those should be ignored, but it's really
easy to shine a big light on those and not focus on all of the
positive things occurring in the space. And I've always said, you know,
look, I have been interacting with people directly in the crypto space for I
guess about seven or eight years now, and these are just on the whole.
These are some of the smartest people that I interact with in any aspect
of what I do. That tells me something when I see the caliber of
individual who is operating in this space. Now, that doesn't mean that really
smart people can also commit fraud, right, maybe that happens or do things
they shouldn't be doing. But I'm just telling you that the level of intelligence
I see, the caliber of talent in the crypto industry, to me is
mind boggling and it's not something that I can ignore when I see that.
This isn't some fringe you know, you have, you know, low caliber
players involved in the space. We're talking some of the smartest, brightest minds
probably in the world involved here now, So you just can't ignore that.
In my opinion, Yeah, absolutely, And I've spoken to quite a few
who were in web one point, oh and two point Oho and are here
now guys obviously, Andresen Howard's the guys who a Netscape, Mike Belshie at
bitgo, who is at Google? And just many of these legacy tech guys
are here building in web three. So to your point, a lot of
brilliant and smart people here. I know we're coming up one time. I
got some wrap up questions here for you. First is if you could create
your own metaverse, what would the theme be great my own metaverse? What
would you put your oculus in? Go to? Probably something that features like
a bunch of nineties alternative and grunge bands, right, so like you can
walk around and attend a virtual Nirvana concert or I don't know, a virtual
Smashing Pumpkins concert or whatever, and maybe interact with other people who appreciate that
same genre of music. I guess that's what I would create, but I
don't know. I prefer living in reality, so I'm not a big metaverse
person, but maybe that'll change. Well, it sounds like your nineties alternative
grunge grund rock fan, because it was gonna be one of my rapid fire
questions, and I'm a big fan as well. I still listen to my
Pearlo jam Stone Temple Pilot and they want and so forth, let's jump to
a favorite rapid fire favorite food. Favorite food without question is going to be
spaghetti and meatballs. Okay, but it has to be homemade Italian style,
so I obviously have an Italian background. My mom's probably one of the best
cooks walking the face of the earth, and she makes this from scratch.
There's nothing that compares to it. That's awesome. And favorite musician, Well,
I guess your favorite band. Okay, so favorite band, I guess
I would probably give you. I give you two. I would say I've
always had I just I love The Cure right, which they span the eighties
into the nineties, so always love them. Somebody more recent, maybe Cage
the Elephant, who their friend of mine, because I'm actually going to go
to their concert later this summer, which I can't wait for. But I'll
also I'll plug there's a new indie band I don't know that they're new like
this year, but over the past several years called New Constellations who I went
to their concert it was like last August or September. They were amazing,
one of the best live performances I've ever heard, and so over the past
year, I've been wearing their their songs out. I gotta check them out.
I'll check them out after this interview. If we're checking home. Favorite
movie movie, I mean, I'm a sucker any any mob movie. I
mean, obviously Godfather, we can go Donnie Brasco, Casino, any of
those. I'm a sucker for something more maybe mainstream flick. I'd go Gladiator
if you remember that. I always liked with Russell Crow. Always loved that
movie. Just a great just to go watch, like on a big screen
or in the theater. I think tough to beat that one. Yeah,
I'm a big fan glad Here and mobster movies too, of Goodfellas, Casino.
It's a good fella all of them. I mean I could watch those
on a loop. Yeah. Favorite book, but you know what, it's
funny. I read a tremendous amount. But I'm not a big book fan.
So like I read. I mean, I'll read academic white papers and
all that. I'm just not a big a fan of reading books. This
may sound I hope this doesn't come off wrong. I think part of it
is I come across so many people who all they do is read books,
but they're not actually living. We talked about the metaverse earlier. They're not
actually like living in reality, right, So somebody will read like these self
help books on I don't know how to start a business or whatever, but
they're not actually doing any of it. Or you're reading all this history,
you're reading how other people live their lives, but you're not actually living yours.
So I hope that doesn't come across wrong. It's like, I appreciate
people who love good books. Obviously, I've read plenty of books before,
but I'm just not a huge I don't get excited over books. You know.
Lately I've been feeling the same way. I've more listened to and this
may see like a whole business is coming across one but more podcasts and listening
to getting stories that way and not some knowledge that way. And don't get
me wrong, you know, books, yeah, of course, I mean
books have a place are very important, I think again to understand history we
talked about earlier. I just it's not I devote my time. And when
you're not working at the ETF store, what are you doing for fun?
I don't know if I would call this fun. But I'm a big runner,
so I actually love running. I mean I'll run, you know,
five or six miles, four or five times a week. For me,
it's just something. It's I'm an extremely thin individual. I don't do it
for anything cosmetically. It's more for me. I love going outside. It's
a good way to clear the air. I love it from a metal standpoint,
like you said, whether it's listening to music, putting, you know,
listening to podcast, or even just running in the quiet. I love
it. So you know, I stay busy enough with you know, the
ETF store and the ETF Institute and the podcast and all that that I don't
have a ton of time for hobby. So it's really you know, family
first, and then obviously everything with a business, and then I enjoy running.
So I guess i'd be the hobby nate. Absolute pleasure chatting with you,
and I appreciate your insights and knowledge, and we'll have to have you
back on once Easy Theorem Spotty TMS go live. But thank you so much
for joining me. Happy to do that. This was a lot of fun.
Thank you, Tony