Speaker 1: If if we saw a black rock file for Solana
Speaker 1: ETF and I would say, maybe something's going on here.
Speaker 1: But they've been on record here for the past week
Speaker 1: or so. I've seen comments on a multiple of their
Speaker 1: executives where they've essentially said it's bitcoin and ether and
Speaker 1: pretty much nothing else at this point. So they don't
Speaker 1: seem to have an interest there. But that would be
Speaker 1: the wildcard. If you see black rock file, I may
Speaker 1: change my turn.
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Speaker 2: link in the description. Welcome into the Thinking Crypto podcast.
Speaker 2: I'm your host, Tony Edward, and with me is Nate Juirasi,
Speaker 2: who's the president of the ETF store. Nate, great to
Speaker 2: see you.
Speaker 1: It's so good to be back here.
Speaker 2: Yeah, for sure, Nate. I thought of you last week
Speaker 2: as the etherorem ETFs went live, Like I got to
Speaker 2: get Nate back on and you know, there's some things
Speaker 2: developing around the Salona ETF, so I want to get
Speaker 2: your perspective there with the Ethereum ETFs their launch. We've
Speaker 2: seen some stats and numbers. Has been about a week
Speaker 2: or so. What is your take on how the launch went?
Speaker 1: Yeah, it's interesting. So we're now a full week into trading.
Speaker 1: I think flows overall look pretty strong. I think if
Speaker 1: we exclude the grayscale ethereum trust so ticker ETHER, which
Speaker 1: I will come back to that in a moment, there's
Speaker 1: been about one point three billion dollars that has come
Speaker 1: into the other eight spot etheror ETFs. Now, just for context, Tony,
Speaker 1: if we were to view those eight ETFs altogether, which
Speaker 1: I think is the right way to do it because
Speaker 1: he's all launched at the same time, and we can
Speaker 1: talk about that, talk about that as well, But that
Speaker 1: one point three billion dollars in inflows, that would be
Speaker 1: good enough for the top five of all ETF launches
Speaker 1: this year. Wow. And here here's the funny thing about that.
Speaker 1: The four ETFs ahead of spot E three ETFs. Again,
Speaker 1: if we view these cumulatively, the other four ETFs, guess what,
Speaker 1: they're all spot bitcoin ETFs. So you know, think about this.
Speaker 1: There's been something like three hundred and twenty five new
Speaker 1: ETF launches this year, and in the ETF space we're
Speaker 1: actually tracking for a record gear of new launches, and
Speaker 1: Spot e F ETFs as a whole already in the
Speaker 1: top five of inflows after just one week. Now, I
Speaker 1: know many people will quickly say yeah, but and that yeah,
Speaker 1: Butt is ETH, which has had one point seven billion
Speaker 1: dollars in outflows, and the narrative is that the money
Speaker 1: coming into the eight new spot Ether ETFs is all
Speaker 1: just recycled money, right. It's people moving out of ETH
Speaker 1: and it's two point five percent expense ratio and they're
Speaker 1: allocating to the less expensive spot ether ETFs. I don't
Speaker 1: fully buy into that because we know from the Spot
Speaker 1: Bitcoin ETF situation and gbt see the Greyscale Bitcoin Trust,
Speaker 1: there were a lot of GBTC investors who were simply
Speaker 1: playing the discount to close, right. They were rbing that
Speaker 1: discount waiting for Spot ETF approval. And so I think
Speaker 1: a lot of the EE outflows are simply hedge funds
Speaker 1: and traders taking profits after the discount and ETH fully closed,
Speaker 1: and now they have the full liquidity of the ETF wrapper,
Speaker 1: which makes it very easy to exit if they so choose.
Speaker 1: You have to remember when you think about GBTC and ETH,
Speaker 1: we don't know all of the motivations of the investors
Speaker 1: who own those products. It's not just long term buy
Speaker 1: and hold investors, right. There are a lot of different
Speaker 1: types of investors with different motivations. So I guess I
Speaker 1: would say, in summary, is there some money that has
Speaker 1: been recycled from ETH into the new ETFs? For sure,
Speaker 1: but I honestly think it's the minority. I would peg
Speaker 1: it at something like twenty five percent or around there.
Speaker 1: But either way, what we know for a fact is
Speaker 1: that one point three billion dollars in investor money has
Speaker 1: wanted to be allocated to spot e three ETFs in
Speaker 1: the past week. We know that, I think that's the
Speaker 1: important number.
Speaker 2: And didn't we see something like this with the Bitcoin
Speaker 2: ETF launch where money was flowing out a GBTC, but
Speaker 2: then you just saw a surge of new capital come
Speaker 2: into the ETFs. And while we don't have all the details,
Speaker 2: it's safe to say, Okay, there's a small percentage of
Speaker 2: the GBTC excuse me, the gray scale etherorem trust is
Speaker 2: coming out, but there's new capital flowing into the ETFs
Speaker 2: as well.
Speaker 1: Yeah, I mean, there's no question. I mean, what both
Speaker 1: GBTC and ETH have done is they've muddied the waters
Speaker 1: in terms of trying to understand exactly what's going on
Speaker 1: with flows. And to your point, the further away we
Speaker 1: get from launch day, the more clearer those waters become
Speaker 1: and we can really decipher what's been going on with flows.
Speaker 1: My expectation is that it will be a similar situation
Speaker 1: to what we saw with the spot bitcoin ETFs. At
Speaker 1: the further out we get, the or the outflows from
Speaker 1: the grayscale products will start to slow down. I think
Speaker 1: we're seeing that a little bit and we'll get a
Speaker 1: much clearer indication of how much demand there is for
Speaker 1: the spot e through ETFs. I've said this multiple times
Speaker 1: and in multiple places. Longer term, my expectation would be
Speaker 1: that the demand for spot ether ETFs would be roughly
Speaker 1: a third of what we saw with spot bitcoin ETFs.
Speaker 1: And it's a very simple calculation. We know that if
Speaker 1: you look at the underlying spot bitcoin and etheryum markets,
Speaker 1: we know that Ether is about a third of the
Speaker 1: market cap of bitcoin. ETFs are simply passed through vehicles
Speaker 1: right their delivery vehicles. They're vehicles that allow investors to
Speaker 1: get very low cost efficient exposure. But what they do
Speaker 1: very well is just replicate the underlying market. And so
Speaker 1: if the underlying market has a ratio, you know, roughly
Speaker 1: Ether being a third the market cap a bitcoin, that's
Speaker 1: what I would expect to see in the ETFs now,
Speaker 1: it's possible longer term that changes. Right, It's possible that
Speaker 1: Ether goes down and maybe it's only twenty percent of
Speaker 1: the market cap a bitcoin, or could go the other way,
Speaker 1: maybe it becomes fifty percent of the market cap. Either way,
Speaker 1: I would expect ETFs to reflect whatever the underlying market
Speaker 1: looks like.
Speaker 2: So on that note of it potentially growing, there's talks
Speaker 2: about the staking component, which is not currently president in
Speaker 2: the et APS. Hester purs SEC Commissioner recently said, you know,
Speaker 2: they're going to look into this and the SECU should
Speaker 2: re visit it. That in conjunction with change in the
Speaker 2: regulatory landscape, politics and so forth, which we'll touch on
Speaker 2: a bit later. Could we see next year to stay
Speaker 2: can get at it and that drives more demand.
Speaker 1: Yeah, there's a lot we can talk about there when
Speaker 1: you add in the political thread. But if I had to,
Speaker 1: I would say yes, I do think it's a matter
Speaker 1: of when, not if. But clearly the SEC isn't comfortable
Speaker 1: with staking right now, and so from my standpoint, the
Speaker 1: question is, okay, well, what would change that. I think
Speaker 1: it's certainly possible that the current SEC comes around on this,
Speaker 1: but it's probably more likely that it would take a
Speaker 1: change in administration. So in this case, it would take
Speaker 1: a Trump administration, which theoretically would then put in Actually
Speaker 1: not theoretically. Donald Trump said he would fire Gary Gensler,
Speaker 1: so we would have a new SEC chair who might
Speaker 1: expedite this. Now, one thing I'll caveat that with and
Speaker 1: this gets a little bit into ETF mechanics, so I
Speaker 1: won't go too far into the weeds, but there are
Speaker 1: some operational considerations around staking within ETFs, because if you're
Speaker 1: staking e it's locked up right and it may take
Speaker 1: X number of days to unlock it. That could present
Speaker 1: an issue if you have an ETF that has a
Speaker 1: large amount of each stake and that ETF also has
Speaker 1: a bunch of outflows. Now that's not something that ETFs
Speaker 1: can't easily overcome. They can get lines of credit and
Speaker 1: such to handle that, but there are some considerations from
Speaker 1: a liquidity management standpoint, and it's possible, I say possible,
Speaker 1: that that's playing a bigger factor in the SEC not
Speaker 1: allowing staking at this point, that they just want to
Speaker 1: see how the spot ETFs operate in their existing format.
Speaker 1: Once they see everything's working properly. Maybe they add that
Speaker 1: and they get comfortable operation. However, I think more likely
Speaker 1: it's that the SEC is still evaluating whether offering the
Speaker 1: staking component trips Ether into becoming a security right versus
Speaker 1: a commodity, and that's going to have to get resolved
Speaker 1: before staking is allowed. One other quick point that'll make,
Speaker 1: and I made this several places as well, but I
Speaker 1: think it's an important one, is that, well, there's no
Speaker 1: question staking is important. That's part of ethereum, that's part
Speaker 1: of the Ether, that's part of the ecosystem. You have
Speaker 1: to remember that right now less than thirty percent of
Speaker 1: all Ether is staked, and the current staking yield is
Speaker 1: only around last I check, it's something like two point
Speaker 1: seven percent, two point eight percent. My point is this,
Speaker 1: I don't think that this is a huge deal in
Speaker 1: terms of driving spot ethere etf demand. It's one of
Speaker 1: those things that would be very nice to have, for sure,
Speaker 1: if you can get an extra you know, three percent yield.
Speaker 1: I'm an advisor. Every basis point count, so it's important.
Speaker 1: I want to be clear about that. But you have
Speaker 1: to look, Ether is up what forty five percent this year?
Speaker 1: This is a high ball asset and so I think
Speaker 1: missing out on a three percent yield isn't going to
Speaker 1: dissuade investors from buying the spot E three ETFs in
Speaker 1: my opinion.
Speaker 2: So what etherorem getting the clarity with the ETFs launch
Speaker 2: and possibly with a regime change we get this staking,
Speaker 2: What does this mean for Solana where there's filers who
Speaker 2: will put out their application for an ETF like van
Speaker 2: K and so forth.
Speaker 1: It's funny because that's the big question now right. We
Speaker 1: had the debut of spot bitcoin ETFs, we had the
Speaker 1: debut of Spotty three ETF, so everybody wants to know
Speaker 1: what's next, and naturally Solana comes to mind. So I
Speaker 1: believe the SEC has a decision to make on both
Speaker 1: the van K in twenty one share Salona ETF filings
Speaker 1: by March of next year. So nineteen B four's were
Speaker 1: filed on both of those in early July. So if
Speaker 1: you do the math, I think that puts us into
Speaker 1: March of twenty twenty five. Now, a lot can happen
Speaker 1: between now and then, but as we sit here today,
Speaker 1: my sense is that similar to what I just mentioned
Speaker 1: with Staking and spot E three ETFs, it will probably
Speaker 1: take a trump administration in order to get Solana ETFs
Speaker 1: approved at least in the shorter term. And my rationale
Speaker 1: for that, Tony, is that there's just been nothing to
Speaker 1: indicate that at Kamala Harris administration, which theoretically they would
Speaker 1: keep a Gensler led sec impact, there's been no indication
Speaker 1: they have any interest in further embracing crypto right now.
Speaker 1: That could change, but you might recall last we chatted,
Speaker 1: I said it would take one of two things in
Speaker 1: order for additional Spot crypto ETFs to come to market,
Speaker 1: which would include obviously Solana. So number one, we either
Speaker 1: need regulated futures contracts to be trading, so in this case,
Speaker 1: we would need CME traded Solana futures, which keep in mind,
Speaker 1: even if we got those, they still have to have
Speaker 1: a track record. Then we would probably need to see
Speaker 1: Solana futures ETFs, and then you'd get the Spot ETF.
Speaker 1: So you're talking probably, you know, a couple of years
Speaker 1: at a minimum for that to play out. The other
Speaker 1: path would be Congress implementing a crypto regulatory framework that
Speaker 1: clearly spells out what is the security and what isn't.
Speaker 1: We had some some movement on that in may would
Speaker 1: fit twenty one and those sorts of things, but in general,
Speaker 1: there just hasn't been much progress on either of those,
Speaker 1: and so it feels to me like it would take
Speaker 1: a change in administration in order to get a Salona
Speaker 1: ETF in twenty twenty five. It is certainly possible that happens,
Speaker 1: I think, both the change in administration and Solana ETF approval,
Speaker 1: but I just think that's a tough thing to handicap
Speaker 1: right now. The other thing that I'll mention real quick
Speaker 1: is it pertains to a Salana ETF or any other
Speaker 1: spot crypto ETF, is that even like let's say, Congress
Speaker 1: is able and fairly short order to put in a
Speaker 1: full crypto regulatory framework, the SEC is still going to
Speaker 1: need to be comfortable with how they're surveilling the underlying
Speaker 1: spot market. So whatever the spot crypto is, that the
Speaker 1: ETF would hold because remember right now crypto exchanges are unregulated. Now,
Speaker 1: perhaps a crypto regulatory framework, if that's implemented, that would
Speaker 1: all be clarified, and so it solves that problem. But
Speaker 1: my point is the SEC, regardless of who is leading it,
Speaker 1: is still going to need to be comfortable with whatever
Speaker 1: the surveillance sharing agreements are that they have in place
Speaker 1: with the underlying crypto exchanges. So again it gets a
Speaker 1: little bit into the weeds, but I think that's an
Speaker 1: important point.
Speaker 2: Yeah, those are great points. And I had a quick
Speaker 2: follo up question on the futures because you stated that
Speaker 2: potentially it might need to that needs to be in
Speaker 2: place for years. Do you think that's that's a Is
Speaker 2: that a rule or is that kind of like, yeah, it's.
Speaker 1: Not a requirement. I'm simply just going off how the
Speaker 1: SEC has approached spot bitcoin and spot ether ETF approval
Speaker 1: where they've wanted to see this truck record. They wanted
Speaker 1: to see this correlation analysis right that the futures in
Speaker 1: the spot market are very tightly correlated, which to me
Speaker 1: that's intuitive. I mean, the markets are highly intertwined, but
Speaker 1: I get it. A regulatory agency such as the SEC,
Speaker 1: they want to see the hard data. They want to
Speaker 1: see the numbers. So yeah, I think it's a matter
Speaker 1: of time. It takes a little while to show the mathematical,
Speaker 1: you know, the underlying correlations there. That's not something that
Speaker 1: happens overnight. So they want to see that track record.
Speaker 1: And then again the path that we have walked at
Speaker 1: least with spot ether in Spot Bitcoin ETFs is then
Speaker 1: we saw the futures based ETFs come to market, right,
Speaker 1: and then we saw the spot ETFs come to market.
Speaker 1: So I just feel like that is probably a longer
Speaker 1: term path. The quicker path would be having this crypto
Speaker 1: again regulatory framework implemented.
Speaker 2: Rook rookie question for the futures Who would it the
Speaker 2: same issuers that do the SPOT that issue the futures
Speaker 2: ETF or would it be like the CMEME or something
Speaker 2: like that.
Speaker 1: No, yeah, it would It would likely be the same
Speaker 1: issuers that we saw futures based crypto ETFs. So we
Speaker 1: saw everybody from pro shares two bit wise you know
Speaker 1: van act. There were a number of issuers who filed
Speaker 1: futures based ETFs that then subsequently have filed or and
Speaker 1: or launched at this point the Spot ETFs.
Speaker 2: There were some interesting news that broke this morning. I
Speaker 2: don't know if you saw it, but it's not confirmed,
Speaker 2: but there's indications based on a court filing that the
Speaker 2: SEC is removing Solana Cardano, Maddic and so forth out
Speaker 2: of the finance lawsuit where the judge wouldn't have to
Speaker 2: rule if those coins or securities are not. Now they
Speaker 2: haven't removed anything from coin based lawsuit Orkraken, But it
Speaker 2: seems to your point earlier that potentially Kamala Harrison her administration,
Speaker 2: if you want I call it, that, are gonna maybe
Speaker 2: do a one eighty. But until we see actual proof,
Speaker 2: it's just all speculative. But that seems promising that maybe
Speaker 2: they're dropping some of these cases against these projects.
Speaker 1: Yeah, I saw that headline, and sure, I think you
Speaker 1: can read that as a promising sign. But what I
Speaker 1: have learned over the years is that it's really difficult
Speaker 1: to read the tea leaves when it comes to the
Speaker 1: sec and I take a step back, and let's put
Speaker 1: Solana or x orp or any other crypto asset aside
Speaker 1: and just think about the products that we currently have
Speaker 1: trading with Spot bitcoin and Spot e through ets. Remember,
Speaker 1: we still don't have cash creations and redemptions on either
Speaker 1: of those products. We don't even have options trading on
Speaker 1: Spot bitcoin ETFs, which have now been on the market
Speaker 1: for whatever six or seven months. There's some basic things
Speaker 1: like that that until I see those, it's hard for
Speaker 1: me to believe that the current administration is all of
Speaker 1: a sudden going to do a one to eighty it
Speaker 1: to your point, and you know, approve something like a
Speaker 1: Solana ETF, but you never know. The political wins can
Speaker 1: shift quickly, and you know, I could see how again
Speaker 1: that headline could be interpreted as a positive sign. I've
Speaker 1: just learned over the years not to read too much
Speaker 1: into those sorts of things.
Speaker 2: Yeah, I same, And until we see concrete evidence and
Speaker 2: they actually do what they're hinting at, it's it's all
Speaker 2: just fugazi, right, it's help.
Speaker 1: I will say this though, if you want a wildcard,
Speaker 1: I don't think it's going to happen. If if we
Speaker 1: saw a black Rock file for a Solana ETF, and
Speaker 1: I would say, maybe something's going on here. But they've
Speaker 1: been on record here for the past week or so.
Speaker 1: I've seen comments on a multiple of their executives where
Speaker 1: they've essentially said it's it's bitcoin and ether and and
Speaker 1: pretty much nothing else at this point. So they don't
Speaker 1: seem to have an interest there. But that would be
Speaker 1: the wildcard if you see black rock file. I may
Speaker 1: change my ten.
Speaker 2: On that note. Maybe it makes sense that there's not
Speaker 2: a third all COINYTIF because I don't know, maybe it
Speaker 2: takes time for the market to get familiar with these
Speaker 2: products and to be accepting a crypto entry. You throw
Speaker 2: too much at them at the same time, it may
Speaker 2: turn them off. But if you just say here's bitcoin,
Speaker 2: if you want, you can get some ethereum as well,
Speaker 2: it's a much easier.
Speaker 1: Pitch, perhaps, But you have to remember that we have
Speaker 1: these products trading over in places like Europe. If you
Speaker 1: go look at the products from it, even anituer who
Speaker 1: now has products in the US twenty one shares, or
Speaker 1: you can look at Vanec. There are Salona exchange straded
Speaker 1: products over there, there are Cardano, and you can go
Speaker 1: down the list. So I hear you. And certainly those
Speaker 1: other crypto assets are a much smaller portion of the
Speaker 1: overall crypto market. But those products have proven to be
Speaker 1: able to function properly in other markets around the world,
Speaker 1: so there's no reason that that wouldn't be the case
Speaker 1: here in the US.
Speaker 2: That's true. And then given how dominant the industry is
Speaker 2: right now in politics and trad fy and so forth,
Speaker 2: people are paying attention. So yeah, I think it's a
Speaker 2: good point.
Speaker 1: Now.
Speaker 2: I saw recently hash decks they filed for an index ETF,
Speaker 2: which would include bitcoin and ether and also opens the
Speaker 2: door for other all coin ets. What are your thoughts
Speaker 2: on that here are probably going to see black Rock
Speaker 2: and these other folks do the same.
Speaker 1: Well, first of all, I am absolutely shocked that hash
Speaker 1: decks is the only issuer has filed for this so far.
Speaker 1: I really can't believe we haven't seen bit wise or
Speaker 1: twenty one shares or grey Skills jump in. But longer term,
Speaker 1: I think I mentioned this last time we chatted. I
Speaker 1: think that this is where it is all heading. So
Speaker 1: spot Bitcoin ETF and Spotty three ETFs they were just
Speaker 1: the first step down the path towards what will ultimately
Speaker 1: be index based crypto ets. We'll see actively managed crypto ETF.
Speaker 1: And what's interesting is that if you go and read
Speaker 1: that hash decks filing, it's clear they plan on adding
Speaker 1: additional crypto assets as they're approved. So it's not just
Speaker 1: I mean, right now it would just be a spot
Speaker 1: bitcoin and spoty through a combined spot dickcoin and Spotty
Speaker 1: three ETF, but the way the language is written as
Speaker 1: such that as other crypto assets are approved, they could
Speaker 1: add those as well. And from the standpoint again, I'm
Speaker 1: an advisor. I'll just tell you that advisors love stuff
Speaker 1: like this because they love diversification, especially in an emerging
Speaker 1: area of the market like crypto. And so if you
Speaker 1: can have a basket of crypto assets, whether it's index
Speaker 1: based or actively managed, I do think that will be
Speaker 1: extremely attractive, particularly to the financial advisor Crome.
Speaker 2: Yeah, that absolutely makes sense. And it's as you're saying,
Speaker 2: as a financial advisor, this is what you guys do,
Speaker 2: and you advise you you know, tell your customers to
Speaker 2: put into this fund and that fund and so on
Speaker 2: and so forth right.
Speaker 1: Yeah, And what's interesting too, is like you and I know,
Speaker 1: and you probably more than I, but I know enough
Speaker 1: around crypto to be dangerous. For sure. Clearly there are
Speaker 1: tremendous differences between Bitcoin and let's say Ether, Like there's
Speaker 1: no question about that. You and I both know that. Yeah,
Speaker 1: But for somebody who maybe is not as familiar with
Speaker 1: the crypto space, what they want is just exposure to
Speaker 1: the category overall and they'll learn. I'm not saying that
Speaker 1: advisor's just going to allocate to combine bitcoin and ether
Speaker 1: etf because they don't want to do the homework and
Speaker 1: figure it out. I'm just telling you that in an
Speaker 1: emerging category, they may like the idea of saying, hey,
Speaker 1: let's spread our bets around here. I don't know exactly
Speaker 1: how this is all going to play out, so why
Speaker 1: don't we put a bet on the bitcoin horse, put
Speaker 1: a bet on the ether horse, put a bet on
Speaker 1: the Salata horse, so on and so forth, and see how
Speaker 1: this plays out. Longer term advisors like to approach things
Speaker 1: like that, and so that's why I think that could
Speaker 1: be a successful path.
Speaker 2: Yeah, that absolutely makes sense. Now let's talk about the
Speaker 2: adoption of the bitcoin ETFs. We got some big news
Speaker 2: last week that the Michigan State Pension fund bought arc
Speaker 2: bitcoin etf Jersey City, which I'm now far from. I'm
Speaker 2: trying to actually get the mayor on the podcast, and
Speaker 2: he's like, we're going to allocate some of our pension
Speaker 2: towards the bitcoin ets This is mind blowing to me.
Speaker 2: What are your thoughts on that.
Speaker 1: I have several thoughts on there, some of which you
Speaker 1: may have seen come through my x feed. I guess,
Speaker 1: first of all, just to be fair, the amount of
Speaker 1: bitcoin ETFs that these pension funds are buying is still
Speaker 1: extremely small. I mean, it really is a sliver. It's
Speaker 1: a small sliver, not through portfolios. But what this does
Speaker 1: indicate is that it's not just the quote unquote Djen
Speaker 1: retail investors buying Spot bitcoin ETFs. From my standpoint, we
Speaker 1: already knew that because we could just look at the
Speaker 1: thirteen F filings and see that there were advisors and
Speaker 1: hedge funds and even some institutional investors buying Spot bitcoin ETFs.
Speaker 1: For some reason, there's been this narrative that is just
Speaker 1: a bunch of robinhood traders or whatever buying Spot bitcoin ETFs.
Speaker 1: Here's why I think about this. Even how do I
Speaker 1: explain this? Even if we were to only include the
Speaker 1: assets that are on the thirteen F filings. Okay, So
Speaker 1: what I'm saying is if we look at the first
Speaker 1: seven months or so off Spot Bitcoin ETF tradings and
Speaker 1: we only look at what's been disclosed on the thirteen
Speaker 1: F filings, which those are investors with more than one
Speaker 1: hundred million dollars and you know, equity assets, you're still
Speaker 1: talking about a highly successful debut from Spot bitcoin ETFs.
Speaker 1: And from my standpoint, and maybe I'm too close to it,
Speaker 1: because again I'm out there on X and see this stuff.
Speaker 1: I feel like some people were just completely wrong on
Speaker 1: what they were expecting from spot bitcoin ETFs, and now
Speaker 1: they're like grasping at straws to defend their bad prediction.
Speaker 1: So I guess I should put that out there more
Speaker 1: importantly to what you were saying. I think that when
Speaker 1: you see Michigan in Jersey City, we saw Wisconsin, when
Speaker 1: you see pension funds like this allocate the spot bitcoin ETFs,
Speaker 1: remember these types of entities, they don't make investment decisions. Lately,
Speaker 1: I've said it's like turning an aircraft carrier right when
Speaker 1: these funds are making investment decisions. So that should tell
Speaker 1: you something about how they're now allocating or when they're
Speaker 1: allocating the spot bitcoin ETFs. And the last thing I'll
Speaker 1: say here is I still think we're very early. I
Speaker 1: know I said that last time we chatted, but I
Speaker 1: mentioned this is a very small sliver of these pension
Speaker 1: funds portfolios. We're only now seeing a few of these
Speaker 1: pensions allocating, right. That's why they're getting the headlines. That's
Speaker 1: why you see the different cryptomedia organizations write articles anytime
Speaker 1: Jersey City or Wisconsin or whoever allocates, Because there's still
Speaker 1: not many out there doing it, but that's a good
Speaker 1: thing in terms of adoption because we are still very
Speaker 1: early and where this is all heading. And I just
Speaker 1: think you're going to see that adoption continue to increase
Speaker 1: as we head into the back half of the year
Speaker 1: and into twenty twenty five.
Speaker 2: So Nay, you kind of have this trifecta of adoption happening.
Speaker 2: You have the et apps, you got these pension funds,
Speaker 2: endowments and so forth allocating. You've got corporations putting bitcoin
Speaker 2: in your balance sheet globally. I'm seeing companies in Japan
Speaker 2: and so forth. And then you have Donald Trump and
Speaker 2: RFK Junior at the Bitcoin Conference, along with Cynthia Alumus
Speaker 2: proposing the United States by bitcoin use it as a
Speaker 2: treasury reserve asset. So you've got countries like El Salvador
Speaker 2: and obviously the United States talks about it. I mean,
Speaker 2: are we seeing the tipping point here for bitcoin adoption
Speaker 2: that it is no longer to stigma, it is no
Speaker 2: longer a dgen retail, but hey, we need to put
Speaker 2: this on our balance sheet.
Speaker 1: Well, first of all, I'm going to be very clear
Speaker 1: or very careful here diving into politics. I learned my lesson.
Speaker 1: I posted a couple of tweets out politically related I
Speaker 1: knew better, and that was the wrong thing to do.
Speaker 1: I learned my quick lesson on that. But if I
Speaker 1: try to put politics completely aside, you know, think about
Speaker 1: last week. I thought it was a very monumental statement
Speaker 1: that we had the Republican presidential nominee speaking at the
Speaker 1: Bitcoin conference. If we go back a year or two years,
Speaker 1: who would have guessed that that would even happen now?
Speaker 1: You know, I don't know if you watched the if
Speaker 1: you watched Trump's speech. I watched it, and I would
Speaker 1: have liked to have seen him focus much more on
Speaker 1: the details of some of the talking points that he
Speaker 1: brought up, whether it be on bitcoin as a strategic
Speaker 1: reserve asset or how he's going to implement a cryptoregulatory
Speaker 1: framework like we were talking about before that really would
Speaker 1: put the US and the driver's seat of crypto innovation.
Speaker 1: But it is important that he did have the high
Speaker 1: level talking points now, and I think he should get
Speaker 1: a lot of credit for that. I just feel like
Speaker 1: it was somewhat of a missed opportunity because his speech
Speaker 1: fell a little more like a campaign speech and someone
Speaker 1: really trying to connect with the bitcoin community. Now RFK Junior.
Speaker 1: I didn't get to see him speak, but from what
Speaker 1: I read, he seemed to connect much more deeply with
Speaker 1: the bitcoin community, just in terms of his his grasping
Speaker 1: of understanding really the underlying ethos and how all of
Speaker 1: this works. But to your point, this has come a
Speaker 1: long way, because nobody would have ever thought that bitcoin
Speaker 1: and crypto ETFs and everything would be in the political
Speaker 1: sphere this quickly. And so I think that it says
Speaker 1: something about the mainstream adoption of crypto assets that this
Speaker 1: is becase becoming more of a mainstream issue, which is
Speaker 1: why we have our presidential candidates, you know, looking at
Speaker 1: this sector. And I'll say the same thing that I
Speaker 1: said with the pension funds allocating to bitcoin and TFS,
Speaker 1: I think this is still we're still very early. I
Speaker 1: think we're going to see more focus in the space
Speaker 1: from politicians. You're going to see more rhetoric. I think
Speaker 1: that they realize that that you can't ignore the bitcoin community.
Speaker 1: You can't ignore the crypto community anymore. It's become too large,
Speaker 1: there's too much money at play here. It's becoming a
Speaker 1: real part of our overall financial system. So I again,
Speaker 1: I think we're early, but I expect to see more
Speaker 1: political rhetoric around us. Yeah.
Speaker 2: I'm fascinated by that because on one level, I'm obviously
Speaker 2: investment in bitcoin, so I want to see the price
Speaker 2: go up. But I'm also just fascinated by the political impact,
Speaker 2: psychology and demographics and the Overton window and all these things. Right,
Speaker 2: it's just fascinating to watch a play out. I feel
Speaker 2: like becoming a crypto investor, I've learned so much about politics,
Speaker 2: money investing. I guess before I had no clues. Listen
Speaker 2: to Jim Kramer on CNBC, and.
Speaker 1: That's what I absolutely love about interacting with the crypto community.
Speaker 1: I've said this before. The reason I have so much
Speaker 1: fun there and it's intriguing to me is just the
Speaker 1: level of knowledge. I feel like people who are outside
Speaker 1: of the crypto community they think that everybody within the
Speaker 1: crypto community is all just number go up, right, But
Speaker 1: when you actually start having real conversations with people involved
Speaker 1: in this community, these are people well versed on economics
Speaker 1: and monetary policy. They're learning about politics and the interplay there.
Speaker 1: I've noticed even on the ETF side in a million years,
Speaker 1: I could have never envisioned just an average person in
Speaker 1: crypto talking about nineteen be fours and s onees in
Speaker 1: creation and redemption. And so I love that. I feel
Speaker 1: like people who are involved with crypto have a real
Speaker 1: thirst for knowledge. They want to understand how things work,
Speaker 1: because it takes a lot to understand how crypto works,
Speaker 1: in my opinion. But and so maybe there's some soul
Speaker 1: selection there that maybe you do have a higher caliber
Speaker 1: of individual operating in the crypto space. I don't know
Speaker 1: if that's the case, but it's just a very curious
Speaker 1: community and I love that.
Speaker 2: Yeah, it's amazing, I would say, if it's the right statement,
Speaker 2: my IQ level went up. And then understanding of how
Speaker 2: the world works since investing in crypto, and I think
Speaker 2: money is a big part of that, right and what
Speaker 2: is money? The history of money and what the future
Speaker 2: may look like with this technology is fascinating. Now we
Speaker 2: got the Fed telling us this week what they're going
Speaker 2: to do with interest rates, and this impacts crypto to
Speaker 2: stock market and so forth as much as you can.
Speaker 2: Because you're a financial advice or you got to stay
Speaker 2: in certain lanes and there's guardrails. What is your outlook.
Speaker 2: Do you think the FED is going to signal a
Speaker 2: cut coming later this year or twenty twenty five, and
Speaker 2: the market's start rallying off of that.
Speaker 1: Well, first of all, what I think is interesting is
Speaker 1: that coming into twenty twenty four, the expectation was for
Speaker 1: six rate cuts by the market. Clearly the market was
Speaker 1: wrong on that. Now expectations are that the FED is
Speaker 1: going to cut rates here at the meeting this week
Speaker 1: and then potentially another time later this year. What I'm watching,
Speaker 1: you know, there's been here recently a very interesting rotation
Speaker 1: in the market where we've seen money come out of
Speaker 1: some of the large megacap tech names that have really
Speaker 1: been leading the market and rotating into smaller cap names,
Speaker 1: and you can see that reflected in performance. I think
Speaker 1: last I check, if you look at the Magnificent seven stocks,
Speaker 1: something like one point five trillion dollars in market cap
Speaker 1: has come out of those firms over the past several weeks,
Speaker 1: which one point five trillion a market cap that's like
Speaker 1: a full Meta, like that's the market cap of Meta
Speaker 1: or something like that. But I think that it's going
Speaker 1: to be interesting to see how the FED messages the
Speaker 1: rate cuts because the way I'm looking at things, the
Speaker 1: stock market is up SMP's up fifteen percent this year,
Speaker 1: something like forty five percent going back to the beginning
Speaker 1: of last year. Typically rate cuts would bode well for
Speaker 1: higher growth stocks, and I would say stocks in general.
Speaker 1: So I think it's interesting to see the FED cutting
Speaker 1: into an environment where stocks have done really well. Now,
Speaker 1: supposedly the Fed's not watching the stock market. They're watching
Speaker 1: the economy, and if they're seeing some of the economic
Speaker 1: data rollover, they're trying to get out ahead of that. Right,
Speaker 1: they have a dual mandate. They're trying to maintain price
Speaker 1: stability so keep inflation under control, and they want to
Speaker 1: maximize employment. And so if they're starting to see some
Speaker 1: data in the labor market that's rolling over, they want
Speaker 1: to stay ahead of that because they don't want the
Speaker 1: labor market to start going the wrong direct direction and
Speaker 1: into a spiral to where then you know, it tips
Speaker 1: the economy into a recession. So I'm saying a lot
Speaker 1: here would maybe saying without saying a lot. In terms
Speaker 1: of the market, I think it's going to be fascinating
Speaker 1: to watch. Here's what I'll tell you I think is
Speaker 1: really interesting from a crypto perspective, there's this narrative that
Speaker 1: bitcoin and ether and a lot of other crypto assets
Speaker 1: they're just risk on assets. And if that's the case,
Speaker 1: similar to what I was saying with growth stocks, if
Speaker 1: rates were to come back in, I could paint the
Speaker 1: argument that could be beneficial for crypto So I'm really
Speaker 1: fascinated to watch how different crypto assets react if and
Speaker 1: when we get rate cuts. That's going to be, you know,
Speaker 1: a dynamic that I think a lot of people want
Speaker 1: to see how that plays out, because theoretically have inflation
Speaker 1: coming down as well. And I'll add one other wild
Speaker 1: card in there, Tony, which is that last I checked,
Speaker 1: there's something like six trillion dollars in money market funds. Okay,
Speaker 1: So as rates have come up over the past couple
Speaker 1: of years, you had a lot of investors that put
Speaker 1: money into money market funds because pretty much risk free,
Speaker 1: they could scoop up a five to five and a
Speaker 1: half percent U Okay, if rates start dropping, short term
Speaker 1: rates start dropping, obviously, the yields on those money market
Speaker 1: funds comes down, and I could see a scenario where
Speaker 1: investors say, Okay, I'm not getting my five five and
Speaker 1: a half percent yield. I'm going to take that money
Speaker 1: my money market fund and allocate it somewhere. Now where
Speaker 1: might that go? Does it just go into bond ETFs
Speaker 1: where they're trying to lock in longer term rates and
Speaker 1: maybe play some capital appreciation of rates come in. Perhaps,
Speaker 1: But you could also make the case that some of
Speaker 1: that money goes into the stock marketer goes into crypto.
Speaker 1: So that's another fascinating area to watch what happens to
Speaker 1: that money and money market funds.
Speaker 2: Nate, you are spot on, and I'll use myself as
Speaker 2: the anecdotal evidence. I have a financial advisor. Look, I'm
Speaker 2: heavily allocated to crypto. But for my wife and me,
Speaker 2: you know, we have a financial advisor, and we put
Speaker 2: a lot of money into the money market accounts because
Speaker 2: rates are high. Move some of our stuff in our
Speaker 2: traditional checking and savings sit there to get the higher rates.
Speaker 2: But if the rates start cutting, we're going to revisit
Speaker 2: and say, well, what are we doing with this money?
Speaker 2: There's no point in keeping it there if you can
Speaker 2: get a higher return on assets.
Speaker 1: Exactly, and I think you're going to see a lot
Speaker 1: of investors think that way. Now. Again, to be clear,
Speaker 1: there's a huge difference in the risk profile obviously of
Speaker 1: a money market fund versus stocks or crypto, no question
Speaker 1: about that. But it does it's a catalyst, it's an
Speaker 1: impetus for investors to go, you know what, I'm not
Speaker 1: getting that same rate, so just what you were saying,
Speaker 1: maybe I should consider other options out there. So it's
Speaker 1: going to be it's a wild card to watch. But
Speaker 1: what I've learned over the year, similar with the SEC
Speaker 1: and not reading the tea leaves, is I try not
Speaker 1: to read the tea leaves too much with a FED
Speaker 1: because I always say, nobody knows anything, nobody has a
Speaker 1: crystal ball. And you know that's why you want to
Speaker 1: take a long term approach to investing. You want to
Speaker 1: take a diversified approach to investing, and I've always tried
Speaker 1: to take that. TAC doesn't mean you don't follow the
Speaker 1: day to day moves and what's going on in the market.
Speaker 1: You always stay educated, but I think you have to
Speaker 1: take a longer term approach and not get too hung
Speaker 1: up on short term moves such as the FED cutting rights.
Speaker 2: Yeah. Absolutely, but do you think that the markets though
Speaker 2: it's kind of like, look, Jerome Power comes on says, hey, look,
Speaker 2: in September, we're going to cut by twenty five basis points.
Speaker 2: It's not that they have to cut by two hundred
Speaker 2: or whatever, right, but rather it's a signal to say,
Speaker 2: easy money cycles coming back.
Speaker 1: Quantity Ansually, that's where it gets into the commentary surrounding it,
Speaker 1: and you know, they'll talk about exactly which economic data
Speaker 1: points they're looking at, what has their concern right now,
Speaker 1: maybe what doesn't have their concern. You have to read
Speaker 1: into some of that. It's not just the headline rate cut,
Speaker 1: it's the commentary surrounding that, and then more importantly, it's
Speaker 1: the economic data that comes in subsequent to the rate cut.
Speaker 1: What do the jobs reports look like, what does the
Speaker 1: CPI the PPI data look like. You have to look
Speaker 1: at all of that data and try to paint a picture,
Speaker 1: which isn't the easiest thing in the world to do.
Speaker 2: And Nay, I don't know if you've seen these charts.
Speaker 2: You probably have, but as a flintil visor, but historically,
Speaker 2: and this is not one hundred percent accurate, but there's
Speaker 2: some correlation that when they're cutting, something is kind of breaking,
Speaker 2: and it's usually some major market correction coming I don't
Speaker 2: know what you think about that, And it doesn't happen instantaneously,
Speaker 2: but maybe in twenty twenty five we see the markets
Speaker 2: correct because of this.
Speaker 1: Yeah, again I tried to read too much into that.
Speaker 1: I'm sure there's some charts out there that may paint
Speaker 1: the case that when rate could start happening X, y
Speaker 1: or Z happens after that. Again, I don't subscribe ascribe
Speaker 1: to that. I don't have a crystal ball. I try
Speaker 1: to watch the data that we have, and I know
Speaker 1: it sounds really cliche tony, but really, just take a
Speaker 1: long term approach to investing. I think if you do that,
Speaker 1: you can cut out some of this noise in the
Speaker 1: shorter term. So look, the FED has to thread the
Speaker 1: needle here. What we do know is that when inflation
Speaker 1: started running really hard, the FED got it wrong, right,
Speaker 1: they said it was transitory. They were too slow to react.
Speaker 1: And so I guess what I will say is I
Speaker 1: don't have a whole lot of confidence that they're necessarily
Speaker 1: going to get it right coming the other direction. But
Speaker 1: I think trying to read exactly how that plays out
Speaker 1: is I just think it's a difficult proposition. I think
Speaker 1: we just have to look at the data.
Speaker 2: Yeah, and the year spot on because another anecdotal evidence,
Speaker 2: I found that having a ten year outlook on some
Speaker 2: of my investments, regardless of what the hell the volatilities
Speaker 2: that's happening this week or this hour, next month or
Speaker 2: this quarter doesn't matter because I'm just compounding and letting
Speaker 2: it grow. And I've done it with some of my investments,
Speaker 2: and I look back and it's like, you know, I
Speaker 2: save myself some sanity and have some peace of mind
Speaker 2: by not looking at every chart and every volatility marker
Speaker 2: and whatever it may be.
Speaker 1: Well, it's the same thing. We were talking politics earlier,
Speaker 1: and I tweeted out a chart a couple of weeks
Speaker 1: ago that showed the stock market going back to nineteen
Speaker 1: sixty and the different presidents that we've had in office,
Speaker 1: whether Republican or Democrat. And the takeaway from the chart is,
Speaker 1: guess what, Over the long term, stocks go up. Yeah,
Speaker 1: And so people put a lot of mental horsepower into,
Speaker 1: you know, trying to figure out how the election is
Speaker 1: going to impact the market, and all of this bottom
Speaker 1: line is is over the long term, historically we know
Speaker 1: stocks go up. So focus on.
Speaker 2: That absolutely well. Put Nate we'll wrap up on that.
Speaker 2: Thank you so much, man I appreciate your insights.
Speaker 1: Always a pleasure. Thank you for having me