Speaker 1: Hey, folks, we are recording at the Injective Policy Summit
powered by the Blockchain Association, and joining me is Krysta Lynch,
who's the head of Capital Markets and Trading at Grayscale. Christa,
great to have you.
Speaker 2: Thanks so much for having me.
Speaker 1: We've done a virtual interview, so this is our first
in person, so really really awesome to be doing this
with you.
Speaker 2: Yeah, I'm glad we can do it in three dimensions
today for sure.
Speaker 1: So Christa, tell us a bit about what's the latest
with Grayscale. What are some new products that you guys
have launched.
Speaker 2: Yeah, so we're continuing to launch new single token products.
The generic listing standards, which I think we touched on
last time we spoke, really created a framework for bringing
single tokens to market in ETF form, and we're really
excited now we're able to select tokens that we have
a lot of conviction about to deliver in that way.
One that we just launched is hype g. Hypg is
the ticker. It's on the hyper liquid protocol and we're
really excited about hyper Liquid for a couple of reasons.
We'll probably get into perpetual futures and some of the
prevalence they've had in the markets recently, but our hype
product is a way to really express conviction on that protocol. Now,
some other areas we've been focusing on. You know, we'd
be remiss if we didn't talk about how prices have
broadly been flat. We've been working a lot in the
background on some of the infrastructure in order to enhance
existing products that covers things like in kind abilities, staking,
and then also beefing up our educational program. So the
Greyscale Institute is an educational resource we've launched in the
past few months as a way for investors to get
more up to speed on cryptotopics. Also, The Stack, run
by our head of research, Zach Pandle, is a very
active blog that we've been posting a lot on recently.
So building up some stuff in the background to keep
the exuberant up even though the prices might not be
the most exciting thing right now.
Speaker 1: It's really great to hear that you're educating institutions in
these folks because that's so needed for the adoption and
for this acid class and technology to grow an adoption
over time. You mentioned staking, so during this period with
the markets down. Are you seeing more folks starting to steak?
Speaker 2: Yeah, I think the ETFs have really opened up that ability.
Like for me as an example, even though I work
in the crypto industry, I have a lot of crypto
touch points. I'm not ready to stake my own assets personally,
but I am willing and able to stake them through
a product like a grayscale ETF. So I think that
we've seen the ability for ETFs to implement staking as
a way for more investors to get involved in the
staking landscape. And then as we roll out more tokens,
a lot of them are proof of steak assets, and
so that's another way that steaking is becoming more mainstream.
Speaker 1: And I remember a product you guys were first to launch.
I think it was the index like top five yep.
Are you seeing more exposure to that because investors in
the most part look for index investing options.
Speaker 2: Yes. So GDLC is the ticker there, the greyscale coin
Desk Crypto five, And I think that that becomes an
even more compelling product over time as more single token
assets come to market in ETF form, because there are
so many of them, So we see that a lot
of investors are ready to get beyond bitcoin, or perhaps
they're still at the beginning of their crypto journey, but
taking that jump and moving beyond it can be quite
intimidating when there are so many possibilities. So a product
like GDLC, which captures about ninety percent of the crypto
market in one simple ticker, is very compelling. As more
single tokens hit the market in this easy to digest
ETF form, the menu gets bigger, which is great for
investor choice but can also be overwhelming.
Speaker 1: Yeah, and the index makes it way. I don't have
to think it's the exposure like the S and P
five hundred or a NASDAG exactly.
Speaker 2: We like to liken it to the S and P
five hundred. And you can delegate that token selection to
an asset manager like Grayscale, so that you don't have
to go out in diligence all of the protocols individually yourself.
Speaker 1: Would Will there be over time a top ten or
top twenty year, top hundred eventually.
Speaker 2: I think that's the direction of travel. I personally am
optimistic that that will be something of the future. For context,
I used to work on fixed income ETFs and they
use a very specific methodology called stratified sampling to really
facilitate large baskets of underlying assets, and so selfishly, I'm
very excited for a time when we have to use
stratified sampling for crypto ETFs. Of course that would require
a lot more underliars to be in the basket, but
like you said, you know, a crypto ten, a crypto twenty,
a crypto thirty, so on and so forth could make
that a reality.
Speaker 1: So on that note, what this is a very broad question,
but I'm curious to get your thoughts. What does the
future of crypto ETFs look like. We have the spot,
we have futures, we have staking what else exists in
the TRATFI world that is missing from crypto.
Speaker 2: Yeah, I think that continuing to enhance our products through
features like in kind is something that it's not lacking,
but it hasn't necessarily gotten full mainstream adoption yet. So
one possible use case or somewhere where we're seeing a
lot of enthusiasm there for crypto natives who have underlying
token to actually use the inkind mechanism to put their
token into the ETF and through that means they're able
to still maintain the same underlying exposure, but actually get
all the bells and whistles of their brokerage accounts, such
as tax planning, ability to have succession planning on their accounts, transparency,
things like that, just having everything in one place. So
I think that it's not something that's missing, but it's
something that a lot of investors aren't yet fully aware
of or haven't fully adopted, and I think that's an
area of expansion. It's simple, but it's really beautiful, and.
Speaker 1: It seems like ETFs are the preferred way or avenue
for folks to invest in crypto. It makes it easy.
It could be in their retirement account, in a brokerage account.
Do you see that trend continuing?
Speaker 2: I do. I think it's just so transferable. Like you said,
we're doing a lot of education with the advisor community
right now, and a lot of those conversations started months
or even years ago to help them get comfortable with
the underlying asset class and delivering it in the ETF format.
And I think that as they get comfortable, as a
lot of these conversations come to completion, then you're going
to start to see more adoption of bitcoin and other
digital asset ETFs because that is such a transferable and
such an accessible way for advisors to put their clients
into these assets. And the second thing I would say
there is because advisors are now getting comfortable, it's also
a way for them to have a holistic picture of
what their client's wealth is. So if you think about
someone that has token but it's outside of the advised channel,
the advisor is actually able to use that inkind mechanism
that I mentioned to bring those assets in scope and
put it in their advised account.
Speaker 1: And are you seeing more ris be more open to
offering this to their clients as time progresses, education and
things like that.
Speaker 2: They definitely are. These conversations have been ongoing for so long,
but we're finally starting to see some approvals. We're starting
to see some of the green shoots of actual investment,
and it's so satisfying and rewarding to have had a
two year long conversation and finally see that investment come through.
Speaker 1: And what may help take that to the next level
is potentially the Clarity Act passing. Do you seeing that
be that that might be a catalyst to bring in
more investments?
Speaker 2: Absolutely, I think that more regulation, although it might be counterintuitive,
is actually quite helpful for builders and investors alike, because
if you think about building or investing in something that
could change through new regulation or just overnight regime change,
it's very disconcerting, and I think that you see people
sit on the sidelines in the absence of having that clarity.
No pun intended, but I think that the passing of
the Clarity Act would be a major catalyst, and we're
very optimistic that in the coming days. I know we're
getting down to the wire, but it is still possible
that it passes this summer, and I think that would
also help to be a catalyst for crypto prices moving
in sympathy with it.
Speaker 1: Absolutely, it feels like the market is nearing a bottom,
right we hope, we hope. You know some I do
a little bit of chart analysis on my amateur hour,
but still it feels that way, and look, markets are cyclicals.
I feel like going towards the end of the year,
we'll probably be back in a better place.
Speaker 2: I think we're optimistic and I think for us as
a group of people that are overall long term conviction
in the asset class, we try not to sweat the
small downturns. You know, I would also say that this
particular downturn has felt more mature and less volatile than others.
You know, we I think I pulled a stat for
another podcast where there were times when it wouldn't be
unusual to see a ten percent down in one day,
and I think during the most recent downturn, the most
we've seen is two three percent. So while that's still
significant and I understand why it might rattle investors, it
is very different from the environment that we were in
in past downturns. And I will also say, you know,
you look at the bitcoin ETFs as an example. They've
been able to process billions of dollars in outflows, which
is not what we want to see, but it does
demonstrate the orderly nature of these markets. They're able to
consume in a very liquid way, both inflows and outflows,
which speaks to the validity of the ETF wrapper for
this asset class.
Speaker 1: It's very healthy to have that, right, yes it you.
Speaker 2: Know, I say it cometh and goeth. You want to
see it cometh, but sometimes it does go with And
as long as the uh the asset is able to
flow in that way, then it demonstrates that the rapper
is doing its job.
Speaker 1: And when you zoom out from a macro perspective, I'm
talking like five year window, you see that even though
there's ebbs and flows with inflows and outflows and I
said a lot of flows there, the overall trend is still.
Speaker 2: Yes, exactly, and we try to focus on that. Like
I said, we have long term conviction in the asset class,
so try not to sweat the small stuff, although of
course it can be a little disconcerting while you're in
that moment.
Speaker 1: Yeah, and look, this happens in the stock market too.
I mean I just would have an IBM, yeah, just
the other day. So it's it's just as long as
you have the macro view and the fun mentals are
so strong, solid case to just invest and leave it.
Speaker 2: I think so. And it's also a very good time
to be working on some of these infrastructure builds for
our side, the asset manager side, building out the capabilities
to stake, to be able to do in kind and
those types of investments. You know, we talk about infrastructure.
I think we're also seeing a lot of behind the
scenes investment in things like stable coin rails. We see
banks that are really starting to lean into the efficiencies
that this can bring. And so while you don't necessarily
see that in price appreciation, I think we do see
real investment in the space, and that's still to me
indicative of the overall long term trajectory of this asset class.
Speaker 1: You mentioned investment in the stable coin rails. Do you
guys offer etms around stocks for companies like Circle and
your others that are public in an ETF wrapper.
Speaker 2: We have a couple equity thematic products that we like
to say, if you're ready to invest in bitcoin, but
maybe you still want that kind of old school mentality,
if I want to read the balance sheet, I want
to go touch the headquarters building.
Speaker 1: We have that.
Speaker 2: We have that for bitcoin on balance sheet and also
bitcoin minors, and those are a couple equity products that
are crypto adjacent ways, or i should say equity expressions
of bitcoin adjacent investment opportunities.
Speaker 1: Yeah, that's really great, especially with the backdrop of so
many crypto companies going public yet Securitize go public recently,
so it's exciting. There's going to be even more.
Speaker 2: Absolutely, absolutely, and.
Speaker 1: In those equity et aps, does it don't also include
general companies like your SpaceX which has bitcoin in your balance.
Speaker 2: Sheet, so it would be a candidate for a Bitcoin
on balance sheet products. It rebalances quarterly and it will
look at features like who has decided to take the
management decision to put bitcoin on balance sheet. When we
first rolled out this product, we thought that a management
decision to put bitcoin on balance sheet might be indicative
of a forward thinking management approach. And I think that
that was really one of the compelling selling points of
digital asset treasuries, which this is basically a basket.
Speaker 1: Of yeah, and it makes sense. I personally think it's
great to have exposure to both. I hold the crypto assets,
you know, and then also the equity play you get
exposure to both.
Speaker 2: There's so many different flavors of how you can get
bitcoin exposure. And another one that we offer is actually
options based, so derivatives on bitcoin, and it's a way
to get yield on your bitcoin or ethereum exposure, and
that's a covered call strategy. So I think that you know,
investors are starting with bitcoin, which makes sense, and sometimes
they don't necessarily go linear in a linear manner to
the next token. They actually go sideways, so they find
different ways to invest in the token that they've gotten
comfortable with, and that's different ways to express that Bitcoin exposure.
Speaker 1: Yeah, that makes sense. Diversification.
Speaker 2: I think it's yes, right, not only in token, but
how you hold it, how.
Speaker 1: You hold it? Yeah, what's on your road map that
you can share.
Speaker 2: So we've got a couple more single token products that
we filed for that we're very excited about. Like I said,
the generic listing standards have opened the range of what's
possible from an ETF standpoint, and it's exciting now to
be at a stage where we can really overlay our
cryptonative expertise in selecting which tokens we bring to market,
whereas before it was kind of like the choice is bitcoin,
that's what you're working with. So very excited about that.
And then some of these infrastructure plays on the back end.
And then I would say also being a student of
the markets. So right now there's a lot of things
like what we've talked about with clarity that could potentially
give us more clarity no pun intended about the rules
of the road for the future, and I think that
a lot of those are in weight and see mode.
But we are very much keeping an eye on trends
like tokenization, prediction markets, all of these crypto adjacent technologies,
and I think that that's also going to be a
very exciting area once we get more clarity about how
precisely we can operate.
Speaker 1: Yeah, that was as you were talking about it, I thought, oh, wait,
I gotta have to ask you about tokenization because there's
so many assets going on chain yep, how would that
live in an ETF I know it's very early. We're
waiting on the SEC to provide guidance and things like that.
Speaker 2: Well, with tokenization, what I think is interesting. I go
to a lot of traditional finance conferences as well as
today is more crypto native, and I think the conversation
from a traditional lens is often why do I need
to tokenize apple stock? If it ain't broke, don't fix it.
But if you think about the conversation we were having
just a couple of years ago on stable coins, it
was pretty similar. It was why do I need to
tokenize a dollar? Why do I need to tokenize fiat?
And now we're seeing these real use cases for it
with banks adopting it to be more efficient and so
on and so forth, and that really progressed quite quickly.
I think that it could be a similar story for
tokenization of equities and then potentially even beyond to real
world assets like you know, buildings, private credit, other things.
Speaker 1: Like that, and then ETFs themselves potentially being tokenized.
Speaker 2: Absolutely, yes, the sky is the limit for what can
be tokenized, and I think that we're going to have
a lot of opportunity ahead of us.
Speaker 1: For sure. And I think one thing a lot of
people sometimes miss is by tokenizing these assets, you're able
to take them global because not everyone can access the
stocks on in your soccer change or a NASAC. That's right,
and if they just have a crypto wallet, they can
access to tokenized version they get put it to work
defie et cetera.
Speaker 2: And that's been one of the biggest selling points that
we've seen thus far. A lot of our international trading
partners are pointing out that benefit and to get ETF
NERD for a moment. If you want to bring an
ETF to other markets, there's actually different structures that you
have to abide by, but this is a way that
you can have one universal ETF that's really accessible to all.
So I think that that is a very compelling use case. Also,
the twenty four to seven nature is a big reason
that we see advocacy for tokenization.
Speaker 1: Well, I look forward to seeing the gray scale ETFs
tokenize and accessible globally. That that's really cool. Gray Scale,
of course, got to give you guys your kudos fighting
the sec back into gallery Gansler days. Being first in
a market with a lot of ETF products, you guys
have led the charge in many ways.
Speaker 2: We really appreciate the shout out and yes it's been
a wild ride, but a very exciting one.
Speaker 1: Well, Christa, thank you so much. Looking forward to our
next thing and the future updates, and I appreciate you
taking the time.
Speaker 2: Thanks so much.
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