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Speaker 1: Let's now go to Carol Masser who's standing by with

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Speaker 1: Kathy Wood, the CIO, CEO and co founder of ARC invest.

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Speaker 2: We just got the call. I got the message maybe

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Speaker 2: thirty seconds ago, so I am very happy to share this.

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Speaker 3: With all of you guys.

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Speaker 2: Let's go.

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Speaker 3: It's starting congratulation off and running.

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Speaker 1: All right, So, Kathy, what do you think about in

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Speaker 1: this moment of time, as we said, this has been

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Speaker 1: long in coming.

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Speaker 4: Yes, well, you described two ways this could happen. It

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Speaker 4: can happen very quickly or will it happen very slowly?

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Speaker 4: When you're talking about institutions that you have been very

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Speaker 4: fearful of this space because of Gary Gensler and you know,

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Speaker 4: all of the drama, I think they're going to tread lightly.

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Speaker 4: I don't know if you saw, but Gary Gensler put

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Speaker 4: out a piece today right as we're about to go effective,

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Speaker 4: and I'm sure we all went effective roughly around the

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Speaker 4: same time, and he just denigrated the whole crypto space

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Speaker 4: and I was just like, I couldn't believe it. So anyway,

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Speaker 4: it's with that kind of trepidation that institutions are going

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Speaker 4: to have to, you know, work through and do all

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Speaker 4: of their due diligence. However, I do think that a

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Speaker 4: lot of investors have considered, you know, have been curious.

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Speaker 4: And you'll see we've been from a marketing campaign. We've

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Speaker 4: been using this tagline, aren't you a bit curious? There

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Speaker 4: are so many people who are curious out there. Of course,

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Speaker 4: a lot of our existing clients know all about bitcoin

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Speaker 4: because we have owned it since twenty fifteen, but there

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Speaker 4: are a lot of people who really have a hunger

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Speaker 4: to know, and we can see that as more and

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Speaker 4: more people read our research, tune into our bit coin

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Speaker 4: brainstorm that we do with Rod and UH and Bitcoin

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Speaker 4: Park in Nashville, Tennessee, read our bitcoin monthlies and UH

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Speaker 4: you know, read all we have to say about crypto

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Speaker 4: and blogs and and in our brainstorm summary. So you know,

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Speaker 4: we are getting all the curiosity. I think that's why

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Speaker 4: we started. So we know a lot of people are waiting,

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Speaker 4: and believe it or not, Carol, the curious extend to

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Speaker 4: state pension funds and state treasurers we're talking to, So

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Speaker 4: it's a really broad swap.

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Speaker 3: Well catch people.

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Speaker 1: And I do wonder what you think success will be

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Speaker 1: out of the gate in terms of investment flows. What's

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Speaker 1: your hope, what's your goal or estimate? Uh, in terms

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Speaker 1: of bringing investors into the fund.

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Speaker 3: Well, it's very interesting.

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Speaker 4: I was we were I was speaking to Eric Beltunis,

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Speaker 4: her colleague, and according to his s amidst there's there's

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Speaker 4: four billion dollars waiting, you know, in the wings. And

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Speaker 4: I said to him, well, from your lips to God's ears,

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Speaker 4: that would be amazing.

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Speaker 3: And you know, we hope we get our fair share

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Speaker 3: of it.

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Speaker 4: I mean, we've certainly, we've certainly done a lot to

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Speaker 4: educate the community, and we experienced a lot of gratitude

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Speaker 4: for that too from the innovation communities, including the bitcoin community,

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Speaker 4: but also from the financial community, those who really are

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Speaker 4: trying to find the next big idea.

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Speaker 1: And this can I ask you, as you mentioned SEC

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Speaker 1: chair Gary Gensler at the top, and as the headlines

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Speaker 1: crossed the Bloomberg that he the SEC approved all of

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Speaker 1: those proposals for the spoppy coin ets yours included, along

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Speaker 1: with everyone else the eleven. He also said investors should

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Speaker 1: be cautious on crypto. He said SEC's action doesn't imply

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Speaker 1: approval of crypto exchanges, and if you look at all

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Speaker 1: the SEC filings yours included. There's a long list of

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Speaker 1: concerns that this is still kind of a new concept

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Speaker 1: and new idea, the old.

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Speaker 4: Guard you know, basically throw out there all kinds of risks,

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Speaker 4: and you know, some people call it fear, uncertainty and doubt.

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Speaker 4: It happens every time, Carol, And I'm not saying it's

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Speaker 4: a bad thing for people to really do their homework.

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Speaker 4: They should do their homework, they should understand the risks.

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Speaker 4: But this is par for the course in disruptive innovation,

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Speaker 4: you know, And thank you, Carol. You gave us our

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Speaker 4: first interview twenty fifteen when we were barely off the ground.

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Speaker 3: You believed in us back then. And at the.

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Speaker 4: Time, you remember, we were talking about Tesla, So fear

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Speaker 4: uncertainty and doubt, not even about autonomous which is the

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Speaker 4: next set of fears, but about eve ease and wouldn't

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Speaker 4: traditional auto manufacturers absolutely choke them to death? This is

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Speaker 4: completely new DNA, and so it's the old DNA as

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Speaker 4: the old car companies were the old DNA, you know, basically.

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Speaker 3: Bashing the old new DNA.

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Speaker 4: But truth wins out, truth wins out, better, factor, cheaper,

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Speaker 4: more productive.

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Speaker 1: So yeah, and you know, one thing I want to

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Speaker 1: ask you is as like yourself, all of us here

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Speaker 1: in the newsroom, you know, watching just you know, new

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Speaker 1: things come into the market over decades, and this is

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Speaker 1: certainly interesting, but we are still wondering about the real

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Speaker 1: case use. I mean that no one has really demonstrated

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Speaker 1: a real life use case when it comes to bitcoin.

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Speaker 1: How do you think about it?

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Speaker 4: When you think about it all the time? Our first paper,

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Speaker 4: white paper, was all about could bitcoin serve the three

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Speaker 4: rolls of money? Means of exchange, store of value, unit

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Speaker 4: of account. Most people are thinking store of value right now.

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Speaker 4: But I'm going to plug one of our bitcoin brainstorms

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Speaker 4: if you want a mind blowing experience. And I am

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Speaker 4: lucky to be able to ask questions on these brainstorms.

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Speaker 4: But we had I think it was either our second

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Speaker 4: or third brainstorm, which was about the convergence of bitcoin

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Speaker 4: and artificial intelligence. And we had on people who are

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Speaker 4: toiling to make all of this happen, one of them

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Speaker 4: a roast beef from the Lightning Network or Lightning Labs.

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Speaker 4: And I have to tell you what's going on in

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Speaker 4: the emerging markets and the division of labor, the redefinition

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Speaker 4: of labor A little bit like what happened to the

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Speaker 4: gig economy here, but put that on steroids. Put that

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Speaker 4: on steroids. It's already starting to happen. So I would highly,

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Speaker 4: highly highly advise anyone interested in trying to figure out

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Speaker 4: how the world is going to work listen to that

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Speaker 4: Bitcoin brainstorm, because it's already starting to work in the

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Speaker 4: emerging markets where they need it so desperately.

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Speaker 1: Kathy, what's the advantage of the arc spot Bitcoin etf

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Speaker 1: over the others who also got to prove today? You know,

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Speaker 1: we've been, as you know, reporting a lot about this

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Speaker 1: kind of war on fees. Again today you guys cutting

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Speaker 1: your fee. So what's the advantage of going with you

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Speaker 1: versus a black Rock or a Fidelity or some of

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Speaker 1: the other players who are out there.

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Speaker 4: So at least three advantages, Carol. First, we selected our

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Speaker 4: partner very carefully. Twenty one Shares is the largest peer

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Speaker 4: play crypto ETP provider in the world with two and

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Speaker 4: a half billion dollars and assets. So what does that mean.

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Speaker 4: That means with their forty funds before we launched with them,

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Speaker 4: with their forty funds launched over five years, they have

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Speaker 4: battle tested their infrastructure over booms and busts, over crises,

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Speaker 4: over havings, over four kings. This is not normal for

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Speaker 4: the ETF world. And we think the other ETF providers

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Speaker 4: have a lot to learn, and I'm sure they are

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Speaker 4: and they will as we go through these different kinds

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Speaker 4: of experiences and the end they have economies of scale,

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Speaker 4: believe it or not, that have enabled us to drive

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Speaker 4: down our fees this way. We have more economies of

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Speaker 4: scale because of the infrastructure that twenty one shares have

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Speaker 4: built out.

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Speaker 3: So that's the first. The second is research.

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Speaker 4: Both of us give our research way for free. Our

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Speaker 4: research started in twenty fourteen. We were trying to understand

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Speaker 4: the technology, and then when Chris Berniski took over, we

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Speaker 4: fast forwarded into understanding bitcoin is money and then a

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Speaker 4: new asset class. So we have been taking our clients'

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Speaker 4: prospective clients, anyone who wants to read our research, this

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Speaker 4: journey with us through deep, deep research, and it's getting

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Speaker 4: deeper under Yassin's leadership. So that's the second and then

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Speaker 4: the third, and this one is not to be underestimated us,

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Speaker 4: especially when it comes to the wirehouses like the Morgan Stanley's,

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Speaker 4: the merri Lynch, the UBS, Wells Fargo, our salesforce, our distributor, Resolute,

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Speaker 4: has had our ETFs specialists have had to understand bitcoin

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Speaker 4: since we struck our partnership in twenty sixteen. I had

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Speaker 4: a funny story. Rebecca Burke, who's our most senior ETF specialist,

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Speaker 4: joked with me the other day. She said, do you

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Speaker 4: know when I was coming to interview to I looked

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Speaker 4: up what is bitcoin? And we all laughed about it,

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Speaker 4: because now she not only understands it, she believes in it.

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Speaker 4: Her conviction is how she's able to share that message

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Speaker 4: and hold client's hands when bitcoin goes through some of

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Speaker 4: the volatility that we see it go through regularly. So

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Speaker 4: I think those three. We have the infrastructure and operations.

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Speaker 4: We have the research, deep research, and we've been doing

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Speaker 4: it longer than anyone else. And three we have a

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Speaker 4: support team, a sales team that I don't think anyone

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Speaker 4: else there can beat because we've been doing it together

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Speaker 4: for seven years already, and the same for twenty one

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Speaker 4: shares more on the institutional side, they have been working

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Speaker 4: with their clients for five years.

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Speaker 3: One of the things we wondered.

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Speaker 1: About Kathy, and I'm curious, you know, I'm thinking people

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Speaker 1: who are listening to this, what is the recourse if

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Speaker 1: a custodian who holds the keys to bitcoin loses them,

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Speaker 1: you know, are they're hacked, what's the investor recourse?

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Speaker 4: You know what we have with us on those call

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Speaker 4: Ophelia and Hani, who are the founders of twenty one

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Speaker 4: shares this. You're talking about infrastructure operations. This is what

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Speaker 4: I'm talking about. May I open up the floor to them?

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Speaker 1: Ophelia, you want to come in on that. You are

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Speaker 1: a partnership. You know it's a partnership with you at

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Speaker 1: our absolutely what's your thought on that in terms of

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Speaker 1: concerns that if something happens, if it is hacked, what's

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Speaker 1: the investor recourse?

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Speaker 2: So people are completely right to be concerned. This is

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Speaker 2: the whole point. This is not like stocks and bonds.

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Speaker 2: This requires a very different level of infrastructure, and so

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Speaker 2: I think the first step in this discussion is very

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Speaker 2: clearly prevention. You need to build as robust of a

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Speaker 2: setup as possible, and you need to battle test it.

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Speaker 2: So we've been battle testing our implementations with custodians, our

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Speaker 2: technical infrastructure in the way in which we safeguard assets

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Speaker 2: for five years that's the entire point. You can't treat

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Speaker 2: this like any other asset in the world. It's a

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Speaker 2: bearer asset and it's held in a very technical way.

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Speaker 2: So one of the things that we do is we

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Speaker 2: obviously we use a concept called cold storage. That means

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Speaker 2: is that these assets are held offline in wallets that

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Speaker 2: have never been brought into the Internet, so you've never

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Speaker 2: used them before, which means that they are the information

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Speaker 2: related to the private key doesn't exist on the Internet.

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Speaker 2: It's sort of the you can think of it as

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Speaker 2: the diametric opposite of cloud storage. You essentially end up

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Speaker 2: with a private key that's been charted, so it's been

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Speaker 2: split into multiple pieces, and you need to bring multiple

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Speaker 2: pieces online at the same time. Those pieces are held

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Speaker 2: in vaults that are geographically distributed in order to control

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Speaker 2: access to these products, and then we obviously have a

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Speaker 2: really robust set of controls around that in terms of

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Speaker 2: how you initiate transfers and how you actually move assets,

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Speaker 2: because the most dangerous part of custody is actually very

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Speaker 2: much the point at which you access it right. Very frequently,

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Speaker 2: you know, when people say, oh, somebody took over my

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Speaker 2: exchange account, the underlying wallet's not being hacked. What's actually

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Speaker 2: happening is that their security and access protocols are being

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Speaker 2: compromised in some way not dissimilar from certain social media

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Speaker 2: issues which might have happened yesterday. And so it's really

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Speaker 2: important how you actually secure these assets and why you

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Speaker 2: need to go with a provider that's actually going has

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Speaker 2: a track record and doing this and knows what they're

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Speaker 2: doing through a variety of market conditions, because this is

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Speaker 2: actually a very very technical space.

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Speaker 1: I appreciate that ophiliates Snyder, co founder, president of twenty

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Speaker 1: one Shares, and of course offering up the Bitcoin ETF

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Speaker 1: with our investments, Kathy. One thing I also think is

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Speaker 1: concerns about the price of bitcoin, the volatility. The last

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Speaker 1: three full year returns were gains of three hundred and

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Speaker 1: five percent and twenty twenty up another sixty twenty one,

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Speaker 1: followed by a loss of sixty four percent in twenty

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Speaker 1: twenty two. It's it's a market that can move around.

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Speaker 1: We saw a little bit of a popid bitcoin. Will

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Speaker 1: volatility continue to be a risk or something that investors

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Speaker 1: have to be very much aware of? And I'm curious,

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Speaker 1: what is your price forecast at this point, now that

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Speaker 1: you've got the SEC approval for bitcoin.

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Speaker 4: Sure a couple of things. So the volatility, this again

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Speaker 4: is natural for disruptive innovation that is really going taking

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Speaker 4: market share in any market. So it's it's normal, Carol.

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Speaker 4: You've seen from our fund how disruptive innovation can be

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Speaker 4: affected by exogitiveness factors that don't have anything to do

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Speaker 4: with the share they're actually gaining. In fact, we know

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Speaker 4: that during tough times, innovation gains more traction because it's better, cheaper, faster,

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Speaker 4: more productive and so forth, and this and you saw

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Speaker 4: this during the regional bank crisis. The regional banks imploded,

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Speaker 4: the carry index imploded, we saw bankruptcies, and bitcoin shot

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Speaker 4: up forty percent.

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Speaker 3: Why it's a flight to safety. It is not.

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Speaker 4: It will not be a victim of counter of counterparty

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Speaker 4: risk the way the banks will. So it's it's actually

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Speaker 4: as time goes on and we go through more and

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Speaker 4: more crises, and it seems the way government spending and

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Speaker 4: monetary policies go, you know that that is not going

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Speaker 4: to change. I think bitcoin is going to prove it's

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Speaker 4: worth you know, one thing in terms of price, And

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Speaker 4: then I'd like to just talk about fees because that's

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Speaker 4: so contrax. Yes, so our price target, our our bull

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Speaker 4: price target, and I would say institutional money moving in

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Speaker 4: makes our bull price target more likely. Now is one

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Speaker 4: point five million dollars in twenty thirty. And you can

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Speaker 4: see in Big Ideas, our big ideas from last year

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Speaker 4: aar at ark dash Invest our dash invest dot com.

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Speaker 4: How we the building blocks for that number, right and

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Speaker 4: institutional is one of the biggest reasons. In terms of fees.

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Speaker 4: You'll notice twenty one. That's a very special number. First

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Speaker 4: of all, those are our partners twenty one, but also

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Speaker 4: twenty one million units, our twenty one million bitcoin will

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Speaker 4: that is the total number that will be printed or

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Speaker 4: minted right there.

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Speaker 3: It will not go past twenty one million.

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Speaker 4: This is called this is called a rules based monetary system.

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Speaker 4: And so the fee we thought that was clever and

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Speaker 4: we were going to start out with that one, but

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Speaker 4: we knew what was going to happen, so we ended

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Speaker 4: up there. But I want to bring back something I

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Speaker 4: mentioned other before. We already have the economies of scale

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Speaker 4: that others do not because of our partner twenty one shares,

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Speaker 4: and so we've been able to negotiate down service provider

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Speaker 4: fees in a way that we would not have been

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Speaker 4: able to if we had done this by ourselves. And

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Speaker 4: the other thing I want to emphasize we are not

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Speaker 4: looking to maximize profits with this. We are looking at

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Speaker 4: bitcoin as a public good. It is a financial super

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Speaker 4: highway and we want to increase the access to bitcoin

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Speaker 4: and one of the ways to do that is this

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Speaker 4: low fee product. We have other actively managed strategies where

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Speaker 4: we can do more on the profitability side, right, it

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Speaker 4: is not our objective.

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Speaker 3: Here, Kathy.

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Speaker 1: Just one last question and that I'm glad we got

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Speaker 1: that thirty seconds is to wrap up. I mean, what

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Speaker 1: does success look for you guys in a year from

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Speaker 1: now with this particular product.

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Speaker 4: Well, I think I think we will be a part

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Speaker 4: of the success of bitcoin broadly. I think this opens

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Speaker 4: a new chapter for bitcoin and I would like to

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Speaker 4: believe we would we will be within the top top

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Speaker 4: three or two top providers of.

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Speaker 3: Bitcoin through this bitcoin ETF.

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Speaker 1: All right, Just lastly, as you know I like to

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Speaker 1: squeeze and stuff fifteen seconds, is there new cryptocurrent products

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Speaker 1: ETFs that might come out from you guys as well

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Speaker 1: in the near future.

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Speaker 4: Well, we already put with twenty one shares out five

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Speaker 4: futures products.

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Speaker 3: Those are a strategy.

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Speaker 4: One last thing I'd like to I'd like to honor

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Speaker 4: all of those who have toiled to make bitcoin happen

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Speaker 4: through this ETF I want to reassure.

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Speaker 3: The community, the bitcoin community.

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Speaker 4: That self custody, self custody and an ETF are are

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Speaker 4: not mutually exclusive. We want to see this ecosystem continue

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Speaker 4: to decentralize, but we want to bring billions of people

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Speaker 4: into the ecosystem. And this is why twenty one basis

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Speaker 4: points ARKB.

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Speaker 1: Kathy, I so appreciate you including me on this platform.

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Speaker 1: Kathy would ARC invest founder CEO, cio