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Speaker A: Financial professionals love Ethereum, and it's a very different story from bitcoin. They see bitcoin as digital gold store of wealth, a way to hedge against inflation. They see ethereum as a cash flow driven technology play that is providing an Internet 2.0 and a new way for finance to exist in the world. A... |
Speaker B: Backless nation. We are still basking in the glow of the Ethereum ETF. I would say that's pretty accurate. So we wanted to get another take here, and particularly a take that focuses on how bullish this thing is for Ethereum, for the price of Ethereum. How do you explain this to tradfi? So, our guest today i... |
Speaker C: Not only do we think this is bullish for ETH, the asset, ethereum, the economy, but I think there's a pretty good argument to make that this is bullish for the entire industry. And I think really just Ethereum and Ethio asset is being the vanguard for the industry, fighting a lot of the fights head on to tha... |
Speaker A: So glad to be here. Exciting times. |
Speaker C: Oh, my God. Extremely exciting times. I kind of think that this last week, which we are on the Friday of the ETF, the Ethereum ETF was approved coming up on 24 hours ago, and I think the industry is still processing it. Looking back on this week, I kind of think it marks a new era for crypto, for the entire ... |
Speaker A: I absolutely agree. I, you know, I think it's one of the most historic weeks in crypto's history. You know, for the last 15 years, we've been fighting this fight with one arm tied behind our back and with the sword of damocles hanging over our head from a regulatory perspective, and that seems to have change... |
Speaker B: This week, Matt, I wonder if the future textbooks, crypto textbooks that are going to be written. We'll call this the may surprise, because I certainly think of it as a surprise. And, um, maybe we can go through just what exactly happened here, because, one, I can't hear the story enough. Two, I want to just... |
Speaker A: That's a great question. To anchor the first part of your question. It's absolutely the case that no one expected an approval a week ago. I know there were a few brave voices out there calling for it, but at issuers we were not moving towards approval. Vanex CEO said in April that approval was unlikely. We h... |
Speaker B: Yeah. And so your thesis, too is that this was really politically driven because. Because I'll just say that that's how it seems to us. That's how it definitely feels. |
Speaker C: Those dots connect very easily. |
Speaker B: Those dots, like, definitely connect. We could just draw a line and, like, it's just the easiest, easiest dot game ever. But that would not be encompassing with what the SEC is supposed to do as a merit based regulator and what SEC chairs in current and of the past have said. They base things on rules, they ... |
Speaker A: Well, I'll put on my ETF hat, you know, before Bitwise. Before I joined Bitwise, seven years ago or so, I spent 15 years in the ETF industry. So I have a lot of experience in this ETF space. I haven't seen anything like this. I haven't seen an example of people having no expectation of approval and flipping ... |
Speaker B: So that meant there was no public statements by the commissioners. I feel like we saw public statements for the bitcoin ETF. Am I misremembering? But I remember reading something from Gary Gensler, Hester Purse, at least. But this was like radio silent. It was just like. Was there even a press release at the... |
Speaker A: No, they didn't. There was no press release. There was no hacked Twitter account. |
Speaker B: No. |
Speaker A: The commissioners didn't vote on this one. Again, this was just at the staff level, acting on delegated authority, which is the normal course of business. The commissioner vote was unusual and atypical because bitcoin was so high profile, and this one just went through on delegated authority. |
Speaker C: I can't help but a conspiracy might be that if this was indeed political and the White House Biden administration did call up the SEC, then you would put it to delegated authority because you don't want to reveal the votes, you don't want to reveal the statement, you. |
Speaker B: Don'T want to say anything about it. |
Speaker C: That might be. Some people might. Have. |
Speaker A: You said those words? |
Speaker C: I said those words, yeah. |
Speaker B: Yeah. I mean, this. This feels like the most begrudging approval in ETF history, maybe like, so incredibly. |
Speaker C: Begrudging that they just can't. They don't trust their own poker face to, like, make a statement. |
Speaker B: Matt, I want to ask you kind of the. The wider context. So if this was then politically motivated, who did this? Did we do this? Did the crypto community do this? I. It feels very good to take credit in this moment for everything that the crypto community has done in terms of talking about this very loudly, ... |
Speaker A: I actually think this is a really important question, and I will say that my own view on this evolved over the course of this week. So the first thing we saw was the SAB 121 reversal. And my view at that time was that the primary driver was Wall street starting to lobby. On behalf of that specific example, y... |
Speaker B: Banks wanted it done. |
Speaker A: They wanted it. And I thought that was defining characteristic. But what happened on the fit 21 bill was something different, which is that bill doesn't specifically help Wall street. That actually paves the way for a bankless nation to disrupt Wall street in major ways. I know that it's not a perfect bill, ... |
Speaker B: That is so incredibly bullish, I think, for everyone listening. It's optimistic for this industry, and it teaches us a valuable lesson about how much political agency we really have. I think a lot of people have previously in Crypto believed that their voice didn't matter, that I heard this as late as last w... |
Speaker A: That's absolutely right. And here's a wonderful fact. No one's talking about crypto is apparently the only thing that there is bipartisan consensus on the. When's the last time you saw a probe, a bipartisan vote in Congress? We had 70 plus democrats come over and vote in favor of keeping innovation here in t... |
Speaker C: Matt, I want to circle back on something that you said. You said that there's a 99% chance of the Ethereum ETF's getting approved. And for people who I don't think are, like, super familiar with this process, that might have been confusing to them. It's like I thought, I already thought we got the ETF approv... |
Speaker A: And importantly, I said that James Safar from Bloomberg said that. |
Speaker C: Yeah, yeah. |
Speaker A: We can't forecast what's going to happen because we have a live application at the end SEC. But the way to think of ETF approvals is sort of like a nuclear key situation. You have the 19 B four, which is the approval to list on an exchange. And that's focused on questions around, is there market manipulation... |
Speaker C: And there's nothing really about this process that we are watching. With the ETF getting approved, that's like an anomaly. Other than the fact that there was like this, like crazy pivot, ignoring that this is like, everything is like normal moving forward. So this is like pretty expected to see the 19 four b... |
Speaker A: You know, that's just historically what, what happens. It's usually a multi back and forth process. What you'll see, if you want to monitor how close we are, is you'll start to see issuers file amendments. So what happens is you have an s one that's filed. The SEC gives you comments, you adapt that into a ne... |
Speaker B: In places like bitwen, issuers are all over this. And bitwise, of course, is an issuer. And just one last as we're kind of diagnosing what happened before we get into what the projections are, I'm kind of collecting stories here. Right. I heard James story, obviously, David and I have a story of where we wer... |
Speaker A: Yeah, I was preparing to go on another podcast on to talk about what's going on with SAB 121 when the news came across my desk, which is always very hard because you get this piece of news and you're supposed to be focused and talking about something else. So that was a shocking moment. And then it's all han... |
Speaker C: And yet here we are. If there's one theme I think about this Ethereum ETF, it's curveball. Didn't know it was coming, and now I think the next thing that people are going back and forth on is how big of a deal is it? If you look at the current price of ETH, the current price would suggest actually not that b... |
Speaker A: Yeah, absolutely. There's a lot of demand for Ethereum and there's a lot of demand for accessing crypto in an ETF wrapper. So when you put those together you should expect there to be significant demand for this etfemen. A few reasons for that from a starting point. Professional investors love diversificatio... |
Speaker C: I'm wondering what your methodology at bitwise is for actually probing demand for these assets. I think it was pretty clear that there was definitely demand for bitcoin. Now, we were trying to probe about ETH. I've asked other people at different issuer agencies about their perception of demand for things be... |
Speaker A: Yeah. The primary way we do it, we do 20,000 meetings with professional investors every year. |
Speaker C: Okay, that's a lot of data. |
Speaker A: So that's a bit wise. Representative, a member of our sales team, or myself or another member of the research team having a one on one or one on ten meeting with professional investment firms to talk about crypto. Some of those conversations are bitcoin only, but most of them talk about crypto as an asset cl... |
Speaker B: So, Matt, to put you on the spot, a little bit interested in your take on flows, what flows will look like. And so bitcoin, I think surprised everybody. I don't know if you were surprised about this, but now we're up to something close to between 50 and $60 billion in assets in bitcoin ETF's, which is frankl... |
Speaker A: Great. Yeah. So to add additional piece of context, the bitcoin ETF's have had net flows of about twelve or $13 billion. So those net flows add to the GBTC assets and you sum up to those numbers that you have. That is off the charts for ETF's. It is two or three x, the next most successful ETF of all time. |
Speaker B: This is like the Taylor Swift eras tour of ETF's. Yes. |
Speaker C: Hey Ryan, do you have any dollars? |
Speaker B: I do, David. Why do you ask? |
Speaker A: Yeah, no, that's right. But like a billion dollars is a big number in terms of ETF. I don't think Ethereum ETF's will match bitcoin ETF's but I do think it will be measured in terms of many billions of dollars. So I think the $10 billion will convert. Some of that will be people selling out and so it will ha... |
Speaker C: Yeah. My intuition, just with the supply dynamics of Ethereum, is that ether, the asset, simply just more price sensitive per dollar of demand just because of the burn and proof of stake and all of the other supply sinks for ETH. Matt, you talked about investor appetite for diversification. By my preference ... |
Speaker A: Yeah, I think that will exist as well. I think if you think about the ETF investor market, if I had to put numbers on it, a year from now, I think you'll have 30% of the market. That's bitcoin only. You'll have like 50% of the market. That's a mix. You'll have 20% of the market. That's ETH only. So I think i... |
Speaker B: Could take us to all time highs. Of course, bank listeners will know all time highs are above 4800 or so on the, on the ETH price. Matt, there's more to talk about. In particular, we want to pick your brain about education in tradfi, like what works, what messages are landing. Also want to ask about future E... |
Speaker A: Yeah, I'd answer it at two levels. For one, there are a bunch of investors who really won't care. Like try to talk to an investor about the details between Nvidia's chip design and designs at AMD or something else, no one knows. But many people want just exposure to that entire space. And I think, I hate to ... |
Speaker B: Okay, so first of all, there's the very reductive take, is what you're saying, which is, uh, look, uh, institutional investors are not, not like the maximalists you've seen on crypto Twitter, okay? They look at an asset class and they'll say, I like bitcoin and I also like ethereum, and so why not buy both? ... |
Speaker A: I'll give you the two minute pitch, and then you guys will poke holes in it. The way I start is by saying, because most of these people have no idea why there's more than one crypto asset. They think of bitcoin and Ethereum like they think of the dollar and the euro, because they're both currencies. And what... |
Speaker C: You know, Matt, I think you just kind of gave me flashbacks to my first year of getting into crypto in the first place and just having the aha moment that was like just discovering what these things were. And I don't get too many of those anymore because it's been so far down the rabbit hole. So clearly you'... |
Speaker B: Yeah, that pitch is honed. Honestly, I don't think that that is too difficult to understand. I mean, the way you said it. |
Speaker C: Makes sense to me. |
Speaker B: It makes sense to me. Where can I buy an ETh? |
Speaker C: Where can I buy? |
Speaker B: How do I do that? Okay, so one other piece I want to ask you about, because these Ethereum ETF's that have been approved, they are vanilla ETF's. By that I just mean there's not staked ETh, there's no yield. And I was talking to James. It'll be another process of approvals before we get some notion of a stak... |
Speaker A: Yeah, I absolutely do think thats important. Usually you get into that in the questions. They also talk about carbon footprint. Thats a common question. And you can talk about that. Thats a very strong narrative for this audience. |
Speaker B: Like the ESG thing still kind of matters in crypto circles. |
Speaker A: It does. It does. You got to remember, financial advisors serve individuals, and if you serve 200 individuals, there's going to be a cadre that really cares about ESG elements within your clientele. And so they need to have answers about that. And ethereum fits. |
Speaker B: It's so funny. I haven't heard that narrative much lately, at least in my circles. But it is very true. You could, for somebody that is very ESG conscious, say you've got the energy consuming asset, which is bitcoin, and they've got the clean no energy use asset, which is Ethereum. And maybe that'll matter t... |
Speaker A: It comes up at every conference that I talk about crypto, and I describe it like gas powered cars and electric cars. Different people make different choices. Yeah. So I think you have all of those narratives. I do think usually I get to talking about revenue and a cash flow driven asset before I get to talki... |
Speaker C: I want to zoom out a little bit, Matt, and ask you about the difficulty of your job that has been because of this like, oppressive regulatory environment that crypto has been in for the past 18 months. It's a little bit early because we're just still processing this whole ethereum ETF and this pivot of regul... |
Speaker A: Yeah, I mean, you know, I should say, of course I have the greatest job in the world, as you guys do get to talk about this incredible asset class all the time. But absolutely it's going to get easier. And the reason it's going to get easier is this is all an optional allocation for professional investors. T... |
Speaker B: It has felt like everything, at least for tradfi beyond bitcoin, was in this weird regulatory haze of, we don't know, is this legal or not? And are there institutional investors, you're saying, Matt, that are just waiting for that to lift in order to pour into it? What is the legitimacy signal of not only et... |
Speaker A: Yeah, I think they're probably waiting to see if an ETF launches, but it is a huge validation. I mean, just look at what happened with the bitcoin ETF. You saw the state, Wisconsin allocating to bitcoin. I mean, think about that. You saw the largest hedge funds in the world. You saw hedge funds that manage m... |
Speaker B: Do you have any takes on the current charts here, Matt? I don't know if you give these, but like, you know, to the extent you do have a take on this, what's really interesting to me is like, very clearly we had David and I have called a God candle on Monday. Once the probability of an Ethereum ETF approval w... |
Speaker A: I mean, crypto is so funny. We had the single biggest update in Ethereum's history and we're like, ah, I. |
Speaker B: Know, I feel like it should be more. Honestly, I do feel like this. |
Speaker A: Look, you know, the reality is we exist in crypto 24 7365. This is all we've been thinking about this week. Traditional finance hasn't even registered this. They haven't registered the change that's happened in DC around crypto. They haven't registered that. We're going to get spot Ethereum ETF's. We haven't... |
Speaker C: 25% casual. 25%. |
Speaker B: It's been a pretty good week. |
Speaker A: Trap waits for years for that. It's a great week. It's going to be a great quarter. It's going to be a great year. We'll get there. |
Speaker C: As we wrap up here, Matt, I kind of just want to ask you about future ETF's. This is the question that everyone loves to ask about. I think anyone who's asked this question or heard this question answered before or generally understand theres no immediate new ETF thats on the horizon. Theres a long process f... |
Speaker A: Yeah. Let's talk about the two pathways. Either you need regulated futures to start trading and then to have multiple years of those trading so that you have the data to do this style analysis. And right now there's no regulated futures besides bitcoin and ethereum. Okay, so that pathway is a pathway measure... |
Speaker B: Was something like that in fit, something like the ability to quickly get tokenized assets into. Into the trad world. |
Speaker A: So what you need in order to have an ETF is the ability for the underlying assets to trade on a regulated exchange that you can surveil. The reason the futures on Ethereum are important for us having a spot Ethereum ETF is that the regulatory agencies have increased confidence in the Ethereum market because ... |
Speaker B: Matt, why can they not do that? Surveillance on, like, Kraken and Coinbase, there's a lot of trade. |
Speaker C: What the hell is a regulated venue? Isn't Coinbase and Kraken not regulated? |
Speaker A: Yeah, I mean, you know, don't get mad at me. I don't make. But, yeah, from the SEC's perspective, those are not regulated venues. At the national securities regulation level, there is a different level of regulation. I mean, look, Coinbase, Kraken, etcetera, face a huge regulatory burden, and in my view, are... |
Speaker B: Okay, so some form of fashion, you think the shortcut here is some sort of legislation to make it such that, you know, I always think of these ETF's, in, like, crypto parlance, is it's like a tradfi ERC 20 wrapper for a crypto native asset, basically. And the problem with the current structure we have is tha... |
Speaker A: Look specific to Ethereum. I think it's been caught in a narrative squeeze for the first part of this year between the excitement around bitcoin ETF's and the rebirth of some other layer ones. But I think it has multiple significant tailwinds as we move into the second half of the year. We've been talking ab... |
Speaker B: On that last part. We'll just harken back to a word Matt said earlier in the episode. Patience, patience. We're making incredible progress. Matt, thank you so much. This has been an excellent episode. |
Speaker A: Thanks for having me. |
Speaker B: Bankless nation, gotta let you know, of course, none of this has been financial advice. You know, crypto is risky. You could lose what you put in, even if it's inside of an ETF. But we are headed west. This is the frontier. Not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot... |
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